Copy Trading

Copy trading is an easy way to get started since you simply copy trades carried out by other investors and speculators. Of course, chosing the right people to copy is crucial here.

There are many trading platforms available online that makes copy trading very easy, and some of them have programs where only specially qualified traders can have followers that copy their trade. (That is by no means a guarantee that it will go well.)

Some copy trading solutions are very rigid and will copy the master for you without any flexibility, while others allow you to give more input and adjust the variables. Copy trading can be both automatic and manual.

etoro copytrading

eToro is one of the most well-known copy trading platforms

What can I gain exposure to?

A lot of different assets are available for copy trading, such as:

  • Shares
  • Options
  • Exchange traded funds
  • Commodities
  • Foreign exchange
  • Cryptocurrency

Copy trading is also available for Contracts for Difference (CFDs) and for speculation based on indices.

Can I copy trade on my mobile device?

Yes. Some of the online platforms that offer copy trading are available as apps for mobile devices, including both iOS and Android. This is for instance true for MetaTrader 4, MetaTrader 5 and eToro.

copy trading

A few things to think about

  • Copying someone else saves you from doing the heavy lifting. Or does it? If you refrain from actually learning about markets, assets, etcetera, you will be a sitting duck that’s unable to spot if a master starts behaving strangely. More skilled and experienced investors will leave the ship, but will you understand in time? We advise everyone to continuously improve their knowledge and know-how, even if they prefer copy trading over old-fashioned manual trading.
  • Don´t spread yourself too thin. Since copy trading is so easy, it is tempting to gain exposure to a myriad av markets and asset types at once. A common beginner´s mistake is trying to ”do it all”. Start small and expand gradually instead. Risk spreading is not the same thing as having one finger in every pot while knowing hardly anything about their contents.
  • Fixed and fully-automated copy systems will copy trades in an inflexible manner. Is this right for you, or do you prefer something less rigid? Both choices have their pros and cons.
  • Be extremly cautious about using leverage. Trading is risky. Leveraged trading is riskier. Leveraged copy trading is supremely risky. Leverage is tempting, but you can end up losing more money than you ever had in your account. Never risk money you can´t afford to lose.
  • Some types of copy trading involve paying fees, e.g. signal fees or platform fees. If you are a small-scale trader, even small fees can make a noticable dent in your budget. Also remember that very penny you spend on fees is a penny that you could have invested instead. We are not saying that paying for copy trading is always wrong; we are only saying that it is important to make an informed decision and that small-scale traders need to be extra cautious about how they allocate their limited funds.

This article was last updated on: February 22, 2021