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Huzefa Hamid
Copy trading allows traders to copy positions taken by other traders. It developed from automated trading in 2005 and grew in popularity among retail traders.
The ratings shown on DailyForex.com are determined by hours of research from our editorial team into over 10 factors, including account fees, deposit/withdrawal options, regulatory status, tradable assets, and more.
The ratings shown on DailyForex.com are determined by hours of research from our editorial team into over 10 factors, including account fees, deposit/withdrawal options, regulatory status, tradable assets, and more.
The ratings shown on DailyForex.com are determined by hours of research from our editorial team into over 10 factors, including account fees, deposit/withdrawal options, regulatory status, tradable assets, and more.
The ratings shown on DailyForex.com are determined by hours of research from our editorial team into over 10 factors, including account fees, deposit/withdrawal options, regulatory status, tradable assets, and more.
Best all-around: high floating leverage + fast execution
FXTM is home to over 2,000,000 traders and offers excellent execution statistics confirmed by Big Four accountancy PricewaterhouseCoopers Limited (PwC). The commission-based cost structure remains one of the most trader-friendly among all brokers, and the Loyalty Program, limited to $10,000, allows active traders to decrease costs further. FXTM Invest caters to copy trading, and FXTM dedicated a guide on how to maximize returns. Education forms a core aspect of FXTM, and it received a Best Education Provider 2020 award. It also provides quality research, expanding its product and services portfolio.
Pros
Excellent commission-based Forex pricing environment and transparency
Upgraded MT4/MT5 trading platforms plus proprietary mobile trading app
Quality market research and educational content for beginner traders
Proprietary copy trading platform, low minimum deposit, and high leverage
Cons
Limited choice of cryptocurrencies and commodities
Best broker for social traders and crypto traders : 68% of retail CFD accounts lose money
eToro is home to the most active trading community with more than 13,000,000 traders. Quantity does not equal quality, and 75.0% of traders lose money at eToro. It does state that for 2019, the fifty most-followed traders achieved an average return of 29.1%, an excellent accomplishment. eToro does not offer the MT4 trading platform. It relies on its proprietary alternative, which does not support third-party applications. It does allow for swift copy trading via CopyTrader and CopyPortfolios.
Pros
Active investment community ideal for social trading
Dedicated tools for social trading
Broad cryptocurrency selection
Expanding educational offering for beginner traders
Cons
Internal withdrawal fees
Low retail leverage and higher minimum deposits, but within a reasonable range
OctaFX is another leading choice for copy trading, and it has its proprietary system in place. Despite being an unregulated broker, it enjoys the trust of an expanding client base. More than 1,500,000 accounts suggest that this broker presents a trustworthy trading environment. Traders have three trading platforms, the market leader MT4, its failed successor MT5, and the ECN favorite cTrader. All three fully support automated trading solutions, and while OctaFX deploys its proprietary copy trading system, all trading platforms come equipped with their copy trading functionalities and communities.
Pros
Well-regulated globally, with the Bank of Ireland as the primary regulator
Low minimum deposit and in-depth educational tools
Trade360 does not offer direct copy trading but developed its CrowdTrading technology, incorporated into its proprietary WebTrader. It monitors trading activity based on its clients and alerts traders based on increases in trading and order volume. The information appears in the sidebar of the WebTrader with a function to take a position in the asset. Traders may also use the copy trading function inside the MT5 trading platform, which allows automated trading. New traders will benefit from the educational content, and Trade360 dedicated one lesson to trading psychology, which many brokers omit.
Pros
STP order execution model
Proprietary CrowdTrading Tool
Quality research and educational section
Cons
Most clients will trade with the unregulated entity of this regulated broker.
Low asset selection outside of equity CFDs And no cryptocurrencies.
The sector peaked a decade later, as most realized that it is not as profitable as advertised. Since between 70% to 85% of traders lose money, the majority copies losses. After three years of contractions, copy trading embarked on yet another push higher, especially with the emergence of cryptocurrency trading. Millennial traders pile into copy trading platforms, bypassing necessary Forex education.
Many traders who favor copy trading do so from their mobile devices. Since copy traders do not trade, they do not require the screen space to analyze assets. Copy trading platforms provide performance statistics, operating history, number of copiers, capital following a signal provider, and a risk score. After selecting a trader to copy, copy traders allocate funds to follow the chosen trader. The platform provider will duplicate all actions taken by the signal provider to the copied portfolio, usually proportional to the dedicated capital. Copy traders can stop following a trader or make manual adjustments to the stop loss and take profit levels if desired. Copy trading created a sub-sector of trading, and millennial traders favor the approach, which is not without risks and has failed to deliver consistent results.
Is Copy Trading Legal?
It depends on the jurisdiction, but brokers offer it as a legal service. In 2014, the UK's FCA had the intent to classify copy trading platforms as investment managers.
How Does Copy Trading Work?
Copiers select traders to follow and allocate capital to the strategy. The copy trading platform then copies all actions taken by the trader to the portfolio of the copier.
Copy Trading & Mirror Trading Differences
Both are similar but mirror trading copies the entire strategy without human input or interaction with traders. Copy trading allows copiers to choose traders to copy, adjust copied trades, and provides more freedom overall.
Trading Strategies
Mirror trading is more suitable for advanced traders with more substantial portfolios. It can consist of the input of hundreds of traders and covers more macroeconomic data. Copy trading can follow just one trader and is a better approach for individual traders.
Trading Volumes
Retail traders transact in significantly smaller volumes than professional ones, making copy trading the right choice. While the former may place trades of 100 units, the latter commences from 10,000 and upwards, requiring more capital.
Institutional & Retail Clients
Mirror trading originated in professional trading circles, while copy trading emerged at online brokers catering to retail clients.
Copy Trading Advantages
Copy trading is for individuals who want exposure to financial markets but who lack time to learn how to trade. It is a form of account management, and several regulators investigate the reclassification of copy trading platforms as investment advisors. Copy traders should always monitor their accounts and never trust a strategy blindly.
Between 70% and 85% of all retail traders lose money, and most copiers copy that performance. Most copy trading platforms have no compensation model for traders or demanding conditions that pressure them for increased performance, leading to long-term losses. Traders may also quit at any time, leaving copiers to scramble for new providers.
Market Liquidity with Copy Trading
Should traders take positions in illiquid assets, volatility can rise and cause unacceptable drawdowns on portfolios. Since copiers have no input, they may get higher risk exposure than desired.
Factors to Consider When Choosing a Copy Trading Broker
I recommend that copy traders consider the below items when researching the best copy trading platforms, or to save time, pick one from our list where we have done the hard work for you.
Commissions & Fees
Many brokers increase the spreads or commissions on their copy trading platforms to compensate traders. Others generally have higher fees for their copy trading service. Traders should find a broker that maintains a highly competitive cost structure to increase their profitability.
Funding & Withdrawal Methods
Traders should always trade with a broker that offers the funding and withdrawal methods they prefer. Low-cost online payment processors offer the best service for most traders.
Customer Support
While most traders never require customer support, copy traders should ensure 24/5 assistance is available, as copy trading platforms may experience issues or copiers need help navigating the options.
Comprehensive Trader Resources Offering
Copy trading platforms that offer comprehensive trader resources and trading tools allow traders to achieve better returns. Therefore, copy traders will benefit from a more competitive trading environment.
Regulation
Traders should always trade with a regulated broker and ignore unregulated ones, regardless of the offer. There are rare exceptions, but traders must proceed with caution.
Automated Copy Trading
After a copier selects the desired trader or traders and allocates capital to each, the copy trading platform will mirror all trades taken by the trader. The process is 100% automated without the intervention of the copier. It is the most used form of copy trading.
Semi-Automated Copy Trading
Copiers who wish more input will prefer this option. It allows copiers to review all positions of the trader in real-time and choose which ones to copy. Copiers then may either choose to automatically close copied trades or adjust stop loss and take profit levels.
Manual Copy Trading
Copiers who wish to place and manage trades but require trading signals will engage in manual copy trading. Vast resources exist, free and for a fee, and copiers have full control over all aspects of trading.
Tips for Successful Copy Trading
Here are four tips for successful copy trading to ensure copiers get the best outcome.
Select the right broker - It forms the backbone and safety net for any copy trader. We recommend selecting the right broker for your trading needs with a trustworthy reputation and a trader-friendly cost structure.
Find the right account - Trading from an account suitable to your capital will allow improved trading results.
Choose the ideal signal provider - This is the most challenging aspect. We urge traders to research each trader and select one with similar account size.
Proper settings - Copiers must implement the same settings as the traders they follow. Otherwise, the copied trades may result in losses.
Our Methodology
We reviewed over 100 brokers in-depth based on eleven criteria from the perspective of a trader. Each research consisted of over 2,000 words and lasted more than ten hours. We ensured the most comprehensive approach to identify the best copy trading platforms.
The Eleven Criteria Used in Our Research Consist of:
I’m a trader and manage my own capital. I trade the major Forex pairs, some Futures contracts, and I rely entirely on Technical Analysis to place my trades. Today, I am also a Senior Analyst for DailyForex.com. I began trading the markets in the early 1990s, at the age of sixteen. I had a few hundred British pounds saved up (I grew up in England), with which I was able to open a small account with some help from my Dad. I started my trading journey by buying UK equities that I had read about in the business sections of newspapers. The 1990s were a bull market, so naturally, I made money. I was fortunate enough in my early twenties to have a friend that recommended a Technical Analysis course run by a British trader who emphasized raw chart analysis without indicators. Having this first-principles approach to charts influences how I trade to this day.
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