Copy Trading – Copy a Professional
In this article
Do you know what copy trading is and how it helps you to have a profitable trading journey? Is copy trading legal in the trade market?
If you are trading for the first time, your primary concern is to choose some professional traders and follow in their footsteps to perform the same trading actions. This entire activity is known as copy trading, which is extremely popular among current traders.
Copy-trading works as an investment strategy in which a new trader keeps a track record of different investment moves of successful investors! You will sell when they sell and buy when they buy. In short, you will mirror the trade investments proportionally.
By using an automated copy trading system, a new trader will start following the account of an experienced trader and will copy their trading activities.
As soon as the action happens on the copied trader’s account, the copying trader will also follow a similar action on their account. This can be either opening a position, creating a stop-loss order, or closing a trade position.
What are the pros of copy trading?
Today, many brokers offer copy trading or social trading platforms with various features.
The approach of copy trading is helpful for the market players who have newly stepped into the trading experience. As a new trader, you can copy the trading activities of another successful trader to understand how the trade market works.
If you cannot understand the FX market mechanism and cannot handle the loss, copy trading techniques can grant you high profits.
Automated processes in copy trading simply liberate the investor’s time. All the trade orders are placed by different software. Therefore, we can say that this approach works as a passive investment option.
It allows first-time traders to become familiar with the financial markets and gain confidence in their trading abilities.
In addition, copy trading also helps a new trader control emerging losses. If the outcomes are not working according to your expectations, shifting your attention toward other traders is the best option.
Does copy trading have any drawbacks?
Advanced traders can experience a significant loss due to their trading actions. And the copied trader can also experience that same level of failure if they follow their actions in the same deed.
Regarding the manual CT, traders should have access to a 24/7 trading platform that always needs to stay online.
Additionally, most online brokers offering copy trading charge high commissions or fees for using the copy trading service. A new trader may not be able to afford such charges.
How to copy trade?
To start, sign up with a copy trading provider, pick a trader, and click “follow.” Here are a few tips for getting started.
Open a trading account – One of the first steps to copy trading is to open an account with a copy trading provider. It is quite straightforward to follow. Upon approval of your retail investor accounts, you can follow profitable traders after completing the registration form and making your first deposit.
Choosing a trader – Once your trading account is up and running, you need to pick a trader to follow. The most time-consuming aspect of copy trading is selecting the best traders from a database based on important trading metrics.
Choosing a trader can be difficult because it’s easy to focus on their performance. Additionally, it would help to consider the trader’s risk level, the traded markets, and winners and losers on average.
Follow the trader – When you find an interesting trader, click “follow” to copy his trades. Some social trading platforms allow you to allocate funds to specific traders, which helps limit your risks.
Copy trading strategy
You do not have to develop a personal trading strategy with copy trading. It is possible, however, to choose the best traders by following a copy trading strategy. Copy trading strategies consist of the following main points.
Tradeable markets: Your trading account will automatically update with trades from your followed trader. To determine if your trading style and goals align with the trader’s, you need to know the markets they trade most.
For instance, traders who trade technology stocks predominantly may be subject to technology-related risks. Due to the sudden price movements of cryptocurrencies, traders may experience greater volatility.
Risks: What is your tolerance for risk when copy trading? You can often set a maximum loss on copy trade platforms or allocate a certain percentage of your account to a single trader. Social trading and semi-automated copy trading give you even greater control over risk.
Market analysis: Copy trading has many advantages, including the fact that you are not required to analyze markets yourself. However, inexperienced traders can also use copy trading to their advantage. Monitoring your copied trades and adjusting as necessary if conditions change is a good idea.
Leverage: Are you interested in copying trades? Using leverage can magnify your profits. It can also magnify your losses rapidly due to leverage. Lose no more than you can afford to lose when investing.
Mirror trading vs. copy trading
Copy trading includes mirror trading. Unlike copy trading, mirror trading involves copying an automated trading algorithm rather than a copy of a specific strategy.
Sometimes, a large group of traders creates an automated trading strategy.
It is possible that hundreds of professional traders worked on the creation of the strategy you are following. Copying the algorithmic approach behind a trade is much better than copying individual trades.
Automation: All mirror trades are fully automated, just like copy trades.
Diversification: By following many market inputs, processing them in milliseconds, and generating a trade signal, algorithmic trading strategies can enhance portfolio diversification. Algorithmic trading strategies can also trade more than one market at a time.
Social trading vs. copy trading
The social trading option is also popular among copy traders. Rather than copying other traders’ trades, social trading involves exchanging ideas and researching markets with like-minded peers, which can benefit your trading efficiency.
Copy trading platforms that allow users to interact with many traders are great ways to learn more about trading. Their analysis of the market, their trade management, and why they take certain trades are all explained.
Those benefits, however, are accompanied by a significant disadvantage: Social trading lacks automation. The copy trading app is a place to exchange knowledge, market research, and ideas, but the trades must be opened manually.
Time-consuming: Trading socially requires more time than copying or mirroring.
Education: Social trading allows you to understand how professional traders make trades, as well as what the reasons are behind them.
Risks of Copy trading
As a copy trader, you are subject to the following risks.
There is a significant market risk associated with copy trading. Various market forces ultimately determine the outcome of every live trade. You can lose money by copying works that are affected by market risks, such as changes in the price of Forex, stocks, interest rates, and other assets.
Traders should not mistake market risk for poor performance. Trading losses are a possibility for every professional trader. The majority of experienced traders, however, are familiar with major market forces and try to mitigate market risks as much as possible.
For example, professional traders might avoid trading during high-impact news releases or illiquid Forex market hours. News releases about non-farm payrolls, such as monetary policy decisions, often cause markets to spike.
It is common for copy traders to overlook the risk of liquidity. You cannot directly control the trades your followed trader opens; you will be subject to liquidity risks.
Liquidity risk refers to the possibility that you (or your followers) cannot close a trade at a specified price within a reasonable timeframe.
Without a seller, you won’t be able to buy. On the other hand, if no buyer is available on the market, you cannot sell. The liquidity risk is the possibility that you (or your followed traders) won’t be able to close your trade at a price you want within a reasonable period.
Liquidity risk occurs typically when trading with illiquid instruments, like exotic forex pairs, exotic cryptocurrencies, and low-cap stocks. A low number of market participants can also cause liquidity issues after the market opens or before the market closes.
A major risk you should be aware of is systematic market risk. Diversification cannot reduce systemic risk, which is inherent to every market.
Suddenly and unexpectedly releasing new information is an example of systematic risk. A shockwave was sent through the markets when the Swiss National Bank abandoned its 1.20 EUR/CHF peg in 2015.
Retail investor accounts can suffer extensive damages because of those “black swan” events that are almost impossible to predict.
Trading CFDs using copy trading
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Traders who use social trading to trade CFDs may find it very valuable, but some prefer trading short-term. Especially when you are not extremely experienced in your trades or have not yet been successful independently, copy trading is more popular and beneficial for these traders.
Trading CFDs is a relatively simple method. You can access these social features when you open an account with eToro or Ayondo.
It will also allow you to converse with many traders, see what markets they are trading on, how much risk they are taking, and where they are located. Monitoring the different traders will enable you to identify those who meet similar criteria to those you employ in your trading. For maximum efficiency, certain stipulations can be stipulated in the search filter to suit the needs of your trading. Afterwards, you can keep an eye on their trades, the various actions they take, and at what time they take them. The best traders often copy each other’s moves in their trades when they find one that suits their trading goals.
Your budget will be assigned to the traders you prefer, and from then on, every transaction they make will be copied for you to use. As long as your chosen trading platform copies each trade proportionally to your specified budget, you need not match the budget of your chosen trader. Your copy trading platform will do the rest of the work once you have linked the chosen investors’ transactions. You can stop any trade that you do not feel comfortable making at any time since you will be informed before every trade and will be able to confirm or deny it. It is up to you to decide what to do with your transactions.
It may seem that you are merely capitalising on others’ success, but they also benefit. An account sponsored by the company works similarly to one sponsored by a social media company. A trader’s monthly incentive will increase as their social following grows, increasing the platform’s payment.
As a result, you will be able to give them extra rewards on top of their successful transactions and gain rewards for yourself – all at no additional cost.
Choosing the best copy trading platform
To choose the best copy trading platform, you must consider many factors. A list of the traders a user will be able to access, and the fees that may be charged should also be included.
NAGA, for instance, offers a large pool of investors who can be copied, but any successful trades of €10 or more are subject to a 5% commission. Comparatively, eToro charges no additional fees for its copy trading feature.
EToro pays its commissions instead of the commissions accumulated by successful traders. Keep the minimum investment in mind if you’re looking for the best copy trading platform.
eToro, for example, has a $200 minimum trade requirement per trader. For beginners, DupliTrade’s $5,000 minimum deposit is out of reach for most investors.
Trading Forex copy trading in South Africa with the best brokers
eToro – Overall best Copy trading platform for 2022
Among other copy trading platforms, eToro is the best compared to other providers. The eToro copy trading platform offers thousands of verified traders to copy – so there is something for everyone. Moreover, it’s regulated by a broad range of financial authorities, including the Financial Services Commission, making it one of the best Islamic brokers. eToro products are complex instruments with a high risk of losing money due to leverage.
It is only necessary to allocate $200 per trader. Copying a trader does not require additional fees, so profit sharing is not required. The variety of filters at eToro makes finding a suitable trader a breeze, which we appreciate.
up to 40%
eToro is the worlds' leading social trading platform broker. Connect with successful traders and copy their trades using C...
Axi – popular award-winning copy trading platform
With the Copy Trading features, Axi enables novice traders to achieve the same results as professionals. Copy Trading with Axi has proven very profitable, with at least 263% returns. Before investing financially, traders can analyze the results of the top-earning investors selected by Axi.
A trader can customize their search for traders they wish to copy. Forex, shares, indices, commodities, precious metals, and oil are all available for CopyTrading at Axi. By adjusting their settings, traders can change their own risk when copying trades by professionals.
Axi, earlier known as AxiTrader, is an Australian forex broker that was founded in 2007. Axi, a new brand, was introduced ...
AvaTrade – regulated Forex and CFD Trading platform supports Copy trading accounts
In terms of the best copy trading platforms, AvaTrade is our next recommendation. The platform offers over 1,250 different contracts-for-difference CFD trading instruments. However, AvaTrade works with third-party services that support copy trading.
Still, both third-party copy trading platforms allow users to duplicate the trades of seasoned investors. For AvaTrade to work, an account must be opened, and a minimum deposit of $100 must be made.
To copy an investor, the user must select their preferred third-party provider.
up to $2000
AvaTrade is truly a global broker, regulated across 5 continents. Their Cryptocurrency markets are available for trading 2...
How do you copy the best traders?
Copy traders (trading signal providers) who perform well often have a large following, a proven track record of success (i.e., monthly trading results), consistent risk-adjusted returns, and above-average performance.
When you compare the best traders to copy, don’t focus solely on their absolute returns. When evaluating performance metrics, you’ll want to consider average profit and loss, the number of trades placed, and the average duration.
Finding the right balance of diversification can also be important, depending on your goals. Copying another trader is always a good idea if you are considering your time horizon (or anticipated duration).
Even if the signal provider has a consistent performance history, their investment strategy may change daily in frequency and volume. It’s important to find statistically consistent traders since there is no crystal ball for predicting market movements.
Does copy trading work?
The best-performing traders can provide proof that copy trading works, and you can check their results to verify it. It is also true that some traders lose money when they copy trade.
It’s crucial to pick the right strategies at the right time and then allocate enough capital to each system based on your risk/reward tolerance.
While copying a successful trader or trader who has had good past performance historically does not guarantee success, it can be helpful to increase the odds of making money compared to copying a trader who has had poor results in the past.
Copy trading platforms can offer different tools to analyze traders and manage risk, and database biases may occur. For example, recency bias can lead you to follow the trader who is currently performing well, which isn’t always the best decision.
Furthermore, strategy drift can lead investors astray, which occurs when a trader deviates from their historical approach, which results in unexpected results. Keeping your account performance up-to-date, and intervening as necessary if copy trading is not working for you, is the key to success.
Other thoughts on copy trading
Copy trading success depends on understanding how social copy trading networks rank traders, which determines their ranking. A trade copier’s profitability and loss tracking method are also important.
Developers of social trading technology face challenges if they allow traders to upload their entire trading history instantly. Instant backfill bias is just one example.
In recent years, strong technology and robust broker procedures have made these concerns almost irrelevant, especially among top-rated forex brokers. Still, it is preferable to conduct extensive research and ask questions.
Best traders to copy
Our article examines the best traders to copy on eToro, based on a range of metrics. The information included was the specific asset a trader specialized in their history on eToro, and a risk rating assigned to them.
The top five traders to copy right now are as follows:
Jeppe Kirk Bonde – overall best trader to copy
Jeppe Kirk Bonde is the best trader to copy if you’re looking for the most successful traders. Based on the average annualized returns generated since joining eToro in 2013, this trader has generated a 28% annualized return. A $2,000 investment in Jeppe Kirk Bonde in 2013 would yield approximately 800% returns.
A Jeppe Kirk Bonde gain of 45% was recorded in 2019, while a gain of 36% was recorded in 2020.
2020 was an especially turbulent year for many sectors in the financial markets. With gains of 15%, 2021 was also a good year for traders.
In Jeppe Kirk Bonde’s portfolio, stocks make up the majority. The portfolio currently includes Amazon, Nintendo, Barrick Gold, and Meta Platforms as some of its largest holdings. Bitcoin comprises just 0.2% of the portfolio’s value, which is very small.
Terence Loh – best crypto trader to copy
Since 2014, Terence Loh has been an eToro copy trading program member. In 2019, the trader achieved an 85% profit, one of the highest in the industry. The gains in 2020 and 2021 were 99% and 52%, respectively.
It is worth noting that Terence Loh’s portfolio consists of only two assets – Bitcoin and Apple shares as of this writing. Currently, the portfolio is down 20% due to the general performance of crypto markets in 2022.
Despite Terence Loh’s history of focusing on crypto, eToro has given him a risk rating of only 4. In this way, the trader shows a risk-averse approach. A maximum drawdown of just 7.7% for the trader reinforces this claim.
Fmorbel – top-performing trader in 2022
At the time of writing, Fmorbel is up over 70%, while many preferred traders are losing money in 2022. This trader has entered 50 percent of crypto-related positions since joining eToro in 2017.
Also, Fmorbel likes to have around 25% of its portfolio in stocks. In the years before 2022, Fmorbel provided solid annual returns. The supply of Fmorbel rose 10% in 2020 and 14% in 2021, respectively.
The entire portfolio of Fmorbel has traded as he recognizes the markets are entering the bearish territory. It is a great option if you seek a risk-averse investor to copy since the trader will re-enter the market once a suitable opportunity appears.
CPHequities – great trader to copy for diversified portfolios
CPHequities is a well-diversified eToro copy trading veteran with a strong track record of top-performing trades. With big tech companies as one of the trader’s biggest holdings, he invests mainly in Alphabet, Microsoft, Apple, and Amazon stocks.
The company also trades foreign exchange, with open positions in EUR/USD, AUD/USD, and EUR/JPY at the time of writing. Additionally, the trader has diversified into the crypto market.
All four cryptocurrencies are included here, including Bitcoin, Ethereum, Cardano, and BNB. With CPHequities, every year has been profitable since it joined in 2017. In 2020 and 2021, profits increased by 43% and 35%, respectively. The trader made 10% gains in 2019, 26% in 2018, and 23% in 2017.
Analisisciclico – value investor with a risk rating of just 2
Analysciclico might be a good choice for those looking for low-risk traders to copy. A risk rating of just two to the trader by eToro. A trader made 7% and 29% gains in 2020 and 2021, respectively.
Forex has historically been the trader’s primary focus, with 82% of positions in major currency pairs. The trader also likes to gain exposure to indices and commodities, as well as cryptos and ETFs, on a small scale.
Why do South African traders like to copy trade?
The prior trading experience of successful and experienced traders can benefit you.
Investing in financial markets is risky by nature. Investing in CFDs, stocks, crypto, indices, bonds, and options can be intimidating for new investors. Rather than avoiding the markets, you can leverage professionals’ experience to your advantage.
By leveraging the expertise of proven traders, beginners can benefit from copy trading in South Africa. The ability to copy successful traders allows you to share in their success. The caveat is, however, that trades can also go in the other direction.
Copy Trading is a passive form of investment
Trading with copy or mirror trading provides seasoned traders with passive investments instead of active assets. A professional trader selects financial instruments to trade. They decide when to enter and exit the market, the trading tactics and strategies.
You effectively defer to the pros when you agree to copy their trades. As a passive investor, you focus on other things while an expert manages your trades.
Portfolio diversification is possible with copy trading
Most traders and investors who dabble in financial markets have a narrow focus. Depending on your interests, you may prefer cryptocurrencies, stocks, Forex, or commodities.
If you participate in copy trading, your portfolio will automatically be diversified based on the experts’ trading decisions. You can benefit from their trading performance by copying their trades and diversifying your portfolio.
Much easier to trade Forex markets
Even though copy trading appears to be a leap of faith, it makes trading the financial markets easier since you entrust your money to others. The learning curve on your own would be lengthy, perhaps even expensive, without copy trading.
However, paper trading isn’t a real trade, and while it may allow you to test strategies and tactics, it isn’t a real trade. Your capital is put directly into the markets, while a seasoned trader takes care of the buy and sell decisions. You can opt-out anytime if you don’t want to copy trades.
You get to pick the ideal trader to copy
You have considerable control over which traders you copy as a copy trader. To select which traders to copy, you can enter specific parameters. Stock trading is usually less volatile than currency pairs or crypto, so starting with someone who knows stores is ideal.
Make sure the trader you choose has at least one year of experience in the financial markets. Finally, choose a relatively low-risk score to minimize downside risks.
How is it possible to make more money through copy trading?
The entire approach of the copy trading technique might sound simple. But there are various aspects which you need to follow to bear colossal profit.
When selecting an investment, you should pay attention to risk appetite. Ensure that the investor you are copying has similar ambitions and investment goals.
Try to look for a lower-risk portfolio to create a lower and steadier income. To gradually build your savings from the start, there is no need to copy a trader who is already taking too many risks when buying securities.
Tips to follow for a successful copy trading
With a bit of market research, you can find a variety of broker platforms that offer incredible copy trading services. But it is not guaranteed that each broker will deliver similarly profitable results.
To copy trade successfully, it is essential to put in a little hard work before starting your journey. You should:
- Look for a social trading platform which you can trust a lot. Shortlist the one which is easily accessible, has a high reputation and is transparent. Make sure they are regulated too.
- Search for a regulated broker with similar goals. By tracking the movements of a professional broker, you can establish their goals, patterns, experience, profits, and risk levels. Then, proceed accordingly by identifying the risks and financial objectives.
- Make sure you track the trading account of the trader you are following. There is no need to panic if you did not gain the expected results.
Why is copy trading so popular?
Over the last few years, the approach of copy trading has become extremely popular among traders.
One primary reason to choose copy trading is its lower price than mirror trading. It even allows you to copy a few professional traders, who are known to be the king of the trade market,
In addition, copy trading is highly convenient. You don’t need to put yourself into any direct trading. However, this doesn’t make copy trading a simple technique. All you should do is leave the actual trading to someone else, and you must follow in their footsteps.
Is copy trading profitable?
This is an important question that genuinely hit the minds of so many new traders stepping into the trading market. It usually does work, but the outcome depends on how you use copy trading and which traders you follow.
Like the rest of the trading techniques, copy trading can cause you to lose money. Therefore, studying the approach properly before using it in your trade activities is essential.
1. What is meant by copy trading?
Copy trading is about opening and closing the trade positions based on trading signals providers you are copying to trade.
2. How can you copy traders?
3. Is copy trading legal?
Yes, copy trading is legal to perform. The only restriction is related to trading signals providers because they are also acting as your money manager. It would help if you always looked for certified professional traders as your signal providers.
If your broker is properly regulated by either the Commodity Futures Trading Commission or Securities and Exchange Commission for stocks, copy-trading is legal in South Africa.
4. Are social trading platforms good for beginner traders?
Trading copy is one of the best ways to learn if you’re starting. Market knowledge isn’t necessary for you. By copying others’ success stories, you can replicate their results.
5. Can you get rich copy trading?
If a trader finds a successful trader in South Africa, they can make high profits from copy trading. There is a high risk of losing money during copy trading. If the strategy the trader is copying fails, the trader could lose money.
Liquidity risk may also be present if traders trade volatile instruments. A trader may be exposed to systematic risk if a product experiences sharp declines and rallies.
6. What is the best way for me to begin copy trading in South Africa?
- Choosing a trader is the first step. Search by particular asset, performance, risk tolerance, and other criteria to find traders.
- It is possible to set a total amount. To copy an unlimited amount, you can choose one.
- Copy the text. Copying a trader’s position automatically can be started by clicking “Copy.”
Creating a copy trading account is easy. Click COPY, select the user you’d like to copy, and type the amount you want to copy. Real-time and proportional duplication will take place. The ability to copy a user is available to you at any time.
7. Is copy trading allowed in South Africa?
It is legal to copy trade on the South African stock and commodity exchanges if you have a regulated broker in the financial services industry.
8. If you want to begin copy trading in South Africa, what does it cost?
In South Africa, copy trading does not require a minimum investment. The possibilities are limited, but you can start with $100.
Take a small amount at first. Choosing too many trading signal providers will exhaust your margin quickly, so you may want to reduce the number of providers you use. Investing a minimum amount is required by some trading signal providers to ensure that trades go through.
9. Can you copy trades for a fee?
If you want to replace your current trader, you can do so anytime. Each trader that you follow will still require its account. The copy trading feature is free except for profits made by the Strategy Manager.
To sum up the whole discussion, it’s clear that copy trading is the best approach from which a new trader should benefit. It plays a vital role in devising your trading strategy without trying to read or take some courses.
To start copy trading, look for a regulated broker trading platform that will charge you a specific fee to avail of copy trading services. Check the commissions, trading costs, and additional hidden fees of each broker.
Jason Morgan is an experienced forex analyst and writer with a deep understanding of the financial markets. With over 13+ years of industry experience, he has honed his skills in analyzing and forecasting currency movements, providing valuable insights to traders and investors.
Forex Content Writer | Market Analyst