Copy trading is a method in the financial markets that allows traders to automatically copy positions opened and managed by other selected individuals. In copy trading, a portion of the copying traders funds is linked to the account of the copied investor, and any trading action made by the copied investor, such as opening a position, assigning Stop Loss and Take Profit orders, or closing a position, are also executed in the copying traders account according to the proportion between the copied investors account and the copying traders allotted copy trading funds. The copying trader usually retains the ability to disconnect copied trades and manage them themselves. Copied investors, who are called leaders or signal providers, are often compensated by flat monthly subscription fees on the part of a trader, a signal follower, seeking to copy their trades.
Copy trading is a good option for traders who lack the time or resources to trade on their own. To participate in copy trading, traders need to create an account on a reliable stocks and trading platform. Different copy trading platforms employ different copy trading logic, and these usually vary in regards to the minimum copy trading amounts, the minimum amount for a copied trade, and the way money in/out operations on behalf of the copied trader are reflected in the proportions between the copied-copying accounts.
Pros of copy trading include the chance to gradually make money, a great way to trade as a beginner, and helps to network with expert traders. However, all trading involves a degree of risk, and therefore so does copy trading. It is important to conduct due diligence and not blindly follow someone because they have proven success in the past.
