Guide

What is copy trading? How it works and the risks

Copy trading means automatically copying the positions of another trading account. When that account opens or closes a position, the same trade is reproduced on your account, at a size adjusted to your capital. This guide explains how it works, what you stay in control of, what it costs and the risks, in plain words.

Who does what

Three parties are involved:

You, the copier: you open an account with a broker, deposit your money there and choose which strategy to copy.
The broker: it holds the funds, executes the orders and provides the copy tool. The money stays in your account, in your name.
The strategy provider: it manages its own account. It does not see your money and cannot withdraw it. It is usually paid through a share of its copiers' profits.

How position size is calculated

In the most common mode, copying is proportional: your positions are the same size as the strategy's, scaled to your capital.

Example: the strategy has an account of €20,000 and opens a position of 1 lot. With a copy account of €2,000, ten times smaller, the copied position is 0.1 lot. If the strategy gains or loses 5% on this trade, your account gains or loses roughly 5% too.

“Roughly”, because copying is never perfect: minimum position size, start date, profit share, settings. Our guide on copy results explains these gaps.

What you stay in control of

Your money: it stays with the broker, in your account. You can withdraw it whenever you wish.
Stopping the copy: you can stop copying at any time.
The settings: amount allocated, copy mode, leverage, global stop loss. See our guides on leverage and the global stop loss.

What you do not choose: the positions themselves. When to open or close a position is decided by the strategy.

What it costs

The provider's profit share: a percentage of profits, often calculated with a “high-water mark” so that the same profits are not paid for twice. See our guide on the profit share.
The broker's costs: the gap between buy and sell prices (spread), and financing costs on positions held overnight (swaps).

The risks

Losses are copied just like gains. A loss for the strategy shows up on your account, in the same proportion.
Leverage magnifies everything. In Forex, small price moves can have a large effect on the account.
The headline return does not tell the whole story. The worst floating drawdown, open positions included, shows what the account really went through. See our guide on floating drawdown.
The past guarantees nothing. A strategy that made money for years can lose afterwards.

Losing all the capital invested is possible.

Before copying a strategy

Understand how it works: on which markets, with which method (for example a grid with martingale), and what can make it lose.
Look at the worst floating drawdown rather than the return.
Only put in an amount whose total loss would not change your life.

And at PlanetFinance?

The PlanetFinance strategy is copied with the broker Vantage, with a minimum of €1,000. It trades two currency pairs, AUDCAD and NZDCAD, with a grid and a martingale (see why these two pairs). The profit share is 20% of new profits, settled on the 1st of each month. The strategy is adapted to market conditions. The risks are set out on the Risks page, and the settings in the setup guide.