What is Copy Trading?

A copy trade allows individuals in the financial markets to automatically copy positions opened and managed by other traders.

What is Copy Trading?


Copy trading differs from mirror trading, which allows traders to copy specific strategies, in that a portion of the copying trader's funds are linked to the copied investor's account. In accordance with the proportion between the copied investor's account and the copying trader's allotted copy trading funds, any trading action made from now on by the copied investor, such as opening a position, assigning Stop Loss and Take Profit orders, or closing a position, will also be executed on the copying trader's account.

The copying trader usually retains the ability to disconnect copied trades and manage them independently. It is also possible to close the copy relationship altogether, which closes all copied positions at the current market price. In many cases, traders who follow the trades of copied investors, called signal providers or leaders, are compensated by flat monthly subscription fees. Additionally, popular investors can earn up to 100% spread rebate on their personal transactions. Rewards schemes encourage traders to allow others to monitor and copy their trades instead of trading privately.

It has led to the development of a new type of investment portfolio known as "People-Based Portfolios" or "Signal Portfolios" (borrowing the terminology of MetaQuotes Signal Marketplace). People-based portfolios differ from traditional investment portfolios in that the investment funds are invested in other investors, rather than traditional market-based instruments.

While followers do not pass capital into the accounts of the signal providers, the latter operate as portfolio managers de facto, as they have indirect control over a portion in the capital of the signal followers. Therefore, social trading networks provide an innovative framework for delegated portfolio management.