What is copy trading and how does it work?

Copy trading automatically mirrors the trades of another trader you choose in your own account, in proportion to the capital you allocate. You keep control of your money, but the risk — and the losses — stay yours.

How does copy trading work?

You pick a trader on a platform, decide how much capital to allocate to copying them, and from then on their trades open and close in your account automatically, scaled to your allocation. You can stop copying or close positions whenever you want.

How is a trade scaled to your account?

The mirroring is proportional: if the trader risks 2% of their account, the trade enters at 2% of what you allocated to them.

That works well when both accounts are of similar size, and badly when yours is much smaller. On a small balance the proportion can fall below the minimum size the platform allows, and then there are only two outcomes: the trade does not open at all, or it opens at the minimum — which means taking on more relative risk than the trader you are copying took.

It is worth finding out which of the two your platform does before you allocate the capital, because it changes the risk you are inheriting entirely. If how a risk percentage turns into a position size is not clear, it is in how to calculate position size.

What happens when you stop copying?

It depends on the platform, and it is the small print that surprises people most. Some automatically close your open positions when you unlink; others leave them sitting in your account, and from that moment they are yours: nobody is going to close them for you.

That is a large difference if you stop copying in the middle of a losing trade. It is worth knowing the answer before you need it.

Whose account is it, and who is in control?

In copy trading the trades happen in your account and you keep control at all times: you can close a position, adjust the allocation or unlink without asking anyone.

In a managed account, by contrast, the manager trades a pooled fund and you only share in the result. It's another way of delegating your trading, but with less autonomy on your side.

What are the risks?

More than they first appear:

• A trader's strong past record doesn't guarantee their future results.
• Many signal providers trade heavily leveraged: you copy their risk, not just their wins.
• Slippage grows with popularity. When the copied trader opens a position, every following account executes almost simultaneously, and the last replications tend to fill at a worse price than the original.
• Fees accumulate on every mirrored trade and eat into your net result.

How do you choose who to copy?

Start with what can be measured. Seek a long, verified record that includes the drawdown, check what risk per trade the trader takes, and be wary of accounts that show only the good months.

Copying someone means inheriting their risk management: choose that management, not the promise of profits.

And one question sits outside every performance curve: exactly how the person you copy gets paid. They do not always earn only when you earn, and that part deserves an article of its own.