Copy Trading Explained

Welcome to Elite Copy Trading. This website is dedicated to all things related to copy trading. We aim to explain what copy trading is and how to become profitable as a copy trader. We have many years of experience in both direct trading, and with copy trading platforms and now we want to share this experience with the world. Whether you’re totally new to world of forex and copy trading, or you’re a more seasoned trader, you should find helpful guidance on this website on both understanding more about how copy trading works, and where to find the best and most profitable copy trading platforms.

What Is Copy Trading?

Whereas most financial trading on market, such as stocks, forex, or crypto, are performed by a trader for their own benefit, or on behalf of a managed fund, copy trading allows investors to have their own trading account, but let someone else execute trades in their account on their behalf. Often, an investor may with to copy a professional trader so that they can benefit the traders many years of experience and generate trading profits completely on autopilot. When copy trading is set up, as soon as the “master trader” opens a new trade, the same trade will be mirrored in the copy traders account within a few seconds. Likewise, as soon as the trader closes a trade, the same action is taken in the copy traders account and so on. In some cases, master traders with good experience and a proven track record of profitable results can have thousands of copy traders who follow them.

In many cases, copy trading platforms allow an investor to allocate a proportion of their funds to different traders within the same account. For example, if the investor wants to copy 3 different traders and has $3,000 to invest, they might choose to allocate $1,000 to each trader. In this way, they can build a portfolio of traders and not just be allocating 100% of their funds to a single trader. This can be a good tactic for the investor because it spreads risk across multiple traders. If one trader has a particularly bad run of losing trades, the overall account is less impacted because the other traders might still be performing well. Of course, it can also mean than wins are also more limited, because if one trader is performing especially well, the returns are only based on a portion of the traders account, rather than the entire account.

This is a great explainer video about what copy trading is and how it works on one platform.

What’s in it for the trader?

Of course, it takes traders many years of experience to become accomplished enough to consistently make profits, and once they are able to do so they will can make excellent money trading their own account. That begs the question why they allow other people to copy their trades, when they could simply keep their trading to themselves. Indeed, many successful traders do just trade their own account. Others trade professionally for managed funds, banks and the like. Those that choose to agree to copy trading do so because they are often rewarded by their preferred broker platform for bringing copy traders to them. Brokers make their money from the spread on a currency pair, and they will share these profits with copy traders. This means that when a trader has a large following, they can make considerable profits from the broker, whilst still being able to trade under their own terms and essentially working for themselves rather than working under the terms of a large fund or bank.

How To Make Money With Copy Trading

Copy trading in principal is an incredibly powerful concept and can mean than investors with zero experience in markets such as forex and currency exchange can make considerable profits completely automated. Yet most people still lose money with copy trading. This begs the question “how to make money with copy trading?”

The simple answer is that the success of copy trading is only ever going to be as good as the master traders you can copy. If the quality of master traders is low then the performance of their trading will be poor, and this will translate to poor losses for the copy trader or investor. With copy trading, it’s essential to ensure that you follow profitable traders with a long track record of winning trades. All too often, people copy traders who are having a huge success, but have only been demonstrating wins for a short time, such as weeks or a few months. IN many cases these traders blow their account very quickly because they are trading very aggressively. Good traders will have years of proven track record so you can be comfortable that their trading style is profitable in different market conditions and has stood the test of time.

Is Copy Trading Legal?

Copy trading is perfectly legal and is a well-established form of trading. However, some countries, such as USA, have strict rules and regulations around the trading of volatile markets, including forex, crypto and stocks, and some copy trading platforms (indeed many forex brokers) are only regulated in certain countries. This might mean that you could find a copy trading platform you like, but there are restrictions in your country or jurisdiction that prevent you from opening an account. You should always check with the platform that you are eligible for an account in your country.

What Is The Best Copy Trading Platform?

We’ve established that some copy trading platforms are better than others, and that this is largely determined by the quality of master traders on a given platform. Inevitably, people often therefore ask the question “what copy trading platform is the best?”

Whilst this question is highly subjective and to some extent a matter of personal opinion, some copy trading platforms are undoubtedly better than others. There are some very large copy trading platforms, such as Zulutrade and eToro but just because they are big doesn’t mean that they are th best. Indeed, as this Zulutrade review demonstrates, it’s very difficult to make a profit from that platform. Likewise, if you watch this eToro review you will see a similar pattern on there. It’s a sad fact that most copy trading platforms simply don’t make the type of returns many investors are looking for, and many will lose money in search of the best copy trading platform.

However, truly great copytrading services do exist if you know where to look. We especially like MyDigitrade for various reasons. Read this full review to find out more and to get started with an account.

What Is The Difference Between Copy Trading And Social Trading?

Social trading is a broader term that refers to any instance where a traders trades are shared publicly. This doesn’t mean that all forms of social trading are copy traded though. A trader may make their investments public so other traders can see their performance and follow along with their progress, but that is as far as the sharing goes. With copy trading, the trades are essentially made public, but this is taken a step further by automatically copying those trades in an investors account. Copy trading can therefore be seen as a type of social trading.

A critical difference here in the choice to follow trades or not. With social trading that does not have a copy trade element to it, a trader could be following another trader simply to learn from them, or to see how they are reading the market and never actually decide to copy any of their trades. Other situations might include following a trader and copy SOME of their trades in their own account (those trades being manually executed in the traders account) based on research being conducted and some secondary validation being sought prior to copying any trades. This is clearly more involved than copy trading and is often used by those who have their trading style and are actively trading their own account. With copy trading, once you are connected to a master trader (or traders) your account will blindly follow the exact activity of those traders no matter what. It will run completely automatically and copy every single action taken by the master trader.

Is Copy Trading Safe?

Copy trading is done in volatile markets such as forex, stocks and crypto currency. It should therefore be considered as a high risk. These markets move up and down extremely quickly, and in many cases leverage is used in order to increase the effective value of a trade, and this makes movements even more dramatic. Whilst the upside can mean that wins are accumulated very quickly, so too can losses be accumulated quickly on the downside. There are ways in which the risks can be mitigated, such as not using too much leverage, trading with a stop loss, and following multiple traders to spread the risk across different traders and trading styles. Even so, there are no capital guarantees with any for of copy trading and this is why it’s important to only invest funds you can afford to lose.

What Is The Difference Between Copy Trading And Managed Forex Fund

Managed forex funds are quite different to copy trading, at least in the form of copy trading discussed on this website. In both cases, there is an experienced “master” trader, who is executing trades not just for themselves but for the benefit of others. With a managed forex fund though, the investors’ funds are collected together to make a single fund, which is traded by the master trader, or portfolio manager. Whatever profits are made each month are then divided between all of the investors in the fund according to the size of their investment (usually on a percentage allocation). Because the fund is managed, there are often management fees associated with this type of trading, and the investor will not control their own account. This means that they can not add or withdraw funds at their own discretion and often need to give notice in order to withdraw their funds (although profits are often paid on a regular basis without the need to request them).

With copy trading, the investor has far more control over their own account. They open an account with the broker and the funds remain in their own name. These funds can be withdrawn at any time, and the ability to actually copy trade the master trader can also be switched on and off at any time.

How Much Money Can I Make Copy Trading

This is the million dollar question (quite literally if you’re looking to make a million dollars from copy trading!). The answer is that it’s very difficult to predict the amount that can or will be made from copy trading because there are a myriad of factors that influence this. For the investor It depends on factors such as what platform they use, the quality of the traders they follow, the amount of leverage they use, and if they choose to compound their profits or take them out. On the master traders side, market conditions strongly influence their monthly profits, as does their own mentality and mindset, and the amount of time they spend actively trading (allowing for holidays and breaks in trading). With so many factors in play, it’s impossible to say how much can be made. We’ve already established that many copy traders lose money because they follow the wrong traders or use the wrong platforms. Even though a successful trader with a good track record could make around 10-15% profit per month, this would never be guaranteed and even a trader who has consistently hit similar levels of profit for a long period of time will see month to month fluctuations.

Is Copy Trading A Scam?

Copy trading as a form of investing is not a scam and is very well established and even regulated. However, some investors will inevitably come to the conclusion that copy trading is a scam simply because they keep losing money with different traders and platforms. This again brings us back to the importance of finding a good platform and following the right traders. Just because someone on a blog or forum says that copy trading is a scam doesn’t make it so, and they have probably just had a bad experience. Plenty of people have success with copy trading, they tend to let keep their successes to themselves and let the profits come in monthly on autopilot, which after all, is the main benefit of this type of trading.

How To Do Copy Trading?

In terms of how to actually set up copy trading, the first step is to find the very best copy trading platform. In our view, this is MyDigitrade, although there are hundreds of alternatives available. Once you find the right copy trading platform you can complete an application with them and they will walk you through the set up process and get your account activated. Once your account is open, funded and connected to masters traders your account will operate completely auotamtically and you need do nothing further. You can monitor your trades within your own account to see how it’s performing and can withdraw funds at any time. Once you are set up it really is very easy to manage and run such an account.

How To Set Up Copy Trading In Mt4

MT4 is a very popular platform for forex trading and can be used for copy trading. Many different copy trading platforms use MT4 as their trading software of choice, but most of the time, once you have an MT4 account, you do not need to set up run the actual software on your desktop computer. By providing the copytrading platform with the MT4 details that is sufficient to allow the master traders trades to be copied in your account. This means in most cases there is no need to have any knowledge or experience of MT4 in order to profit from copy trading. It’s also worth noting that not all copy trading platforms use MT4. Some have their own customer software and can act as both broker and social or copy trading platform, such as eToro.

Who Is The best Copy Trading Broker

A good quality copy trading platform will allow you have a choice of brokers that can be used. This is good for the investor as it means they can choose a broker that best suits their requirements in terms of their regulatory status, the cost of trading (spread), reputation and so on. However, most platforms won’t allow the use of just any broker, and usually have a list of approved brokers who they have established relationships with. This means there is still an element of choice for the investor, but does restrict them to the approved list. In order to find the best copy trading broker an investor should do their research and read reviews of what other people in the trading community have said about them. Most good quality copy trading platforms will use only the most reputable brokers but conducting your own research is still recommended.