Copy trading
Family V · Platforms
Not to be confused with api trading, social trading, vps for trading.
Copy trading is an arrangement in which one account's trades are replicated into another account, usually through a platform that links the two. The follower selects a trader or strategy and sets a size rule; the platform then opens, adjusts and closes matching positions as the source account acts. The follower retains ownership of the copied positions and the associated margin and loss.
How replication is sized
Replication is not necessarily one-for-one. Platforms commonly offer a proportional mode, where the follower's trade size scales with the ratio of follower equity to source equity, and a fixed mode, where every copied trade uses a set volume or a set cash amount. A proportional rule keeps the follower's exposure roughly in line with the source account's risk, but the ratio drifts as either account's equity changes.
Some platforms also let the follower set a maximum lot size, a stop-loss on the copied position, or a limit on how many of the source trader's positions are mirrored. These controls change the copied exposure, so the follower's result can differ from the source trader's result even when both hold the same instrument.
Worked example
The follower holds one-tenth of the source position. If the source trader later adds to the position, the platform recalculates the ratio using the equity values at that time, so the copied size may not remain exactly one-tenth of the source size.
Risks and limits
Copy trading transfers the source trader's decisions, not their capital. Losses on copied positions are borne by the follower's account, and a position can be closed at a worse price than the source trader received if the follower's account is smaller, if execution is delayed, or if the follower's broker applies different spreads or slippage. Past performance of a source trader does not indicate future results.
Regulatory treatment of copy trading varies by jurisdiction. Some regulators classify it as portfolio management or as a form of investment advice and impose licensing, disclosure or suitability requirements; others treat it as an order-execution feature. The availability of specific copy-trading modes, the maximum number of followers, and the fee structure are set by the platform and the broker, and differ between providers.
Often confused with
- api trading
- API trading is the use of a programming interface to send orders, receive market data and manage positions on a trading venue or broker account without manual interaction with a graphical platform.
- social trading
- Social trading is a brokerage feature that lets clients view other traders' positions and performance and optionally mirror their trades automatically, with the platform handling execution and position sizing.
- vps for trading
- A virtual private server for trading is a remotely hosted computer that runs trading software continuously, providing a stable, low-latency connection to a broker's servers independent of the trader's local machine.