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Copy trading. A simple guide on how to copy trades to earn money

March 2021

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Many people have the desire to earn money in the financial markets, but not all of them have the time, knowledge and desire to trade on their own. Forex brokers offer affordably and simple-to-use solutions for all categories of customers. Copy trading is one of the most appealing passive income options.

Copying positions using a special social platform, you can achieve expert-level profitability. These kinds of platforms are quite popular, with millions of people joining them. Read on and learn about the steps you need to take to copy traders: which brokers offer this service, how to choose a suitable trader and the copy trading platform and the risks this type of investment involves.

What does copy trading mean?

eToro launched a social trading platform in 2010, introducing copy trading on the Forex market. Inspired by the rapid growth of social media, the developers decided to adjust their philosophy to the sphere of finance.

The idea was equally innovative and simple – to unite the beginners and expert traders on a single trading platform. Professional traders are doing what they love the most – trade, while novice traders have the option to subscribe to them and copy their trades automatically or semi-automatically, using a special set of functions.

Today’s copy trading platforms feature a wide set of functions, including searching for a suitable manager and setting up risk management settings. Here are the key features:

  • A set of functions for communication and interaction inside the network;

  • Analytics of the traders’ trading results;

  • An option to distribute equity among dozens of traders with different strategies and trading instruments under their management;

  • An option to stop copying at any given moment;

  • An option to set up the maximum risk level for each investment.

Every copy trading platform usually also has other unique features.

Pros and cons of Forex copying traders

The benefits of copy trading for an investor are rather evident – it provides a possibility to earn as much as professionals earn, without putting too much effort into it. The traders, whose positions are copied, also benefit, as they gain recognition of their colleagues, a possibility to attract additional capital, and, on some platforms, a part of the profit earned by those traders who copied his/her trades.

Also noteworthy, copy trading platforms do have certain drawbacks, the biggest one being that the excellent results of a trader now do not guarantee that the same will be achieved in the future.

So, let’s sum up the information we have divulged so far.

👍 Pros

  • Low entry threshold

  • A possibility to enter the market without a big trading experience

  • It is potentially possible to earn as much as the top traders

  • Possibility of flexible setting in terms of risk management and search of traders

👎 Cons

  • Successful trading in the past does not guarantee high profit in the future

  • Even the most experienced traders may suffer losses

Top 10 brokers to copy trades on Forex

The first step towards copy trading on Forex is finding a suitable broker that offers this kind of service. We have listed the Top 10 Brokers that meet the following criteria:

  • They are regulated at one of the world’s largest financial centers;

  • They provide exhaustive information regarding all the important conditions and risks of copy trading;

  • They offer beneficial trading conditions: low commissions and fees, wide selection of trading instruments, good quality of order execution;

  • They own their own advanced set of features for copying, or one of the several top social trading platforms, developed by a third party.

Broker

Minimum Investment Amount

Assets for copy trading

Social Trading Platform

Regulator

eToro

$200

Over 2000 trading instruments. Forex, Stocks, ETF, Cryptocurrencies, Commodities, CFDs

eToro CopyTrader

CySEC, FCA, ASIC

AvaTrade

$100

Over 250 assets: Forex, Stocks, Cryptocurrencies, Commodities, CFDs, Bonds, ETF.

AvaSocial, DupliTrade, ZuluTrade, MetaTrader MQL5

Central Bank of Ireland, ASIC, FSCA, Japanese FSA, ADGM, FRSA

FXTM

$100

Markets: Forex, CFDs, Stocks, Commodities

FXTM Invest

CySEC, FCA, FSCA, FSC

RoboForex

$100

Over 12000 trading instruments: Forex, Stocks, ETF, Crypto, Commodities, CFDs

RoboForex CopyFx

IFSC

Naga

$50

Forex, Commodities, CFDs, Stocks

Naga Autocopy

CySEC

IC Markets

$200

Markets: Forex, CFDs, commodities, Crypto, Stocks, Bonds

MyFxBook, ZuluTrade

AFSL, ASIC, CySEC

InstaForex

$10

Over 300 trading instruments: Forex, Stocks, Crypto

ForexCopy

FSC

Tickmill

$100

Markets: Forex, Bonds, CFDs

MyFxBook

FCA, CySEC, FSCA, Seychelles FSA

Forex4You

$1

Forex, CFDs, Crypto

Share4you

BVI FSC

NordFX

$100

Forex, Crypto, Commodities, CFDs

NordFX Copy Trading

VFSC, CySEC, SEBI

Best platforms for copy trading on Forex in 2021

All copy trading platforms can be conditionally divided into two big groups:

  • 1

    Mono-platforms. A number of brokers use their own developments and offer to copy traders only to their own customers. eToro, FXTM, RoboForex, Forex4You have their own proprietary platforms.

  • 2

    Copy trading platform providers. In the list above you can see that the majority of brokers use standard platforms from third-party providers. The most popular among them are MQL, ZuluTrade, Myfxbook and DupliTrade.

Every platform has their own pros and cons. Our experts chose the best ones and compiled a rating. In the table, we specified which brokers use the platform, what the minimum deposit is and the type of the platform — a mono-platform or a provider.

Social Trading Platform

Platform type

Compatibility with trading platforms

Minimum deposit

Brokers that use it

eToro CopyTrader

Mono

eToro

$200

eToro

MQL5 (MetaQuotes)

Provider

MT4, MT5

$0

AvaTrade, XM, IC Markets, Pepperstone, WForex, HotForex

ZuluTrade

Provider

ZuluTrade, MT4, MT5

$300

AvaTrade, IC Markets, FxOpen, Weltrade, Think Markets

FXTM Invest

Mono

MT4, MT5

$100

FXTM

CopyFX

Mono

MT4

$100

RoboForex

Why eToro is the best platform for copy trading

For the review, we will further use the copy trading platform developed by eToro. eToro CopyTrader is a multifunctional social eco-system, which has been estimated by Traders Union experts as the best in the market today.

It has the following advantages:

  • It allows to copy from 1 to 100 traders simultaneously, choosing among dozens thousands of options;

  • Over 2,000 trading instruments, including Forex, Crypto, Stocks and CFDs;

  • The broker provides beneficial trading conditions. In particular, the broker does not charge commission on US stock and ETF trading;

  • It is the largest trading ecosystem in the world with millions of users from 140 countries and over 100,000 signal suppliers. This provides a gigantic choice of strategies;

  • Low entry threshold – from $200 per each copied trader;

  • Flexible filters for trader selection based on the level of risk, profitability, number of copiers and other criteria.

How to choose the best traders to copy

The next important step is searching for the best traders to begin copying trades. This step is just as important as choosing a broker, because whether you earn a good profit or simply waste your time depends on finding the right trader. Because of this, we decided to dedicate more time to this topic and show one of the choice strategies in more detail. As an example, we will use CopyTrader, eToro’s social trading network.

Traders Union experts recommend to follow two basic principles when choosing a trader to copy his/her trades:

  • 1

    Diversify risks through copying several traders simultaneously.

  • 2

    Use a reasonable balance between the risk and potential profitability.

To discover the system of trader search on eToro, you don’t even need to register. You can access the broker’s platform as a guest. You can do it by choosing one of the markets in the Top Markets menu.

Cabinet of eToro - Register

However, we recommend opening a demo account with eToro, as it will allow you not only to review the filters, but also start copying traders, monitoring their financial results in your Personal Account. For these purposes, the broker provides virtual $100,000 on the test account.

When you first access the broker’s platform, you need to select Copy People, which you can find in the menu on the left side of the screen. A system will open that visually resembles a social network.

Icon
Cabinet of eToro - Register

Every trader has an avatar, and it is a real photo of a real person, because traders can achieve serious results on eToro only after verification. If you press on the photo, the trader’s profile will open with the key information about him/her:

  • Personal data, interests;

  • Messages in the social network, where also personal photos can be found;

  • Detailed performance and statistics of the trades;

  • Updated composition of the portfolio;

  • Historical dynamics of portfolio value.

Cabinet of eToro

Now, you can start familiarizing yourself with the system of searching traders for copying. The process can be basically divided into several important stages:

  • Performance assessment.

    The longer the trader trades in the black, the higher is the chance that their good result is not just pure luck. It is important that you have the possibility to view the results at least for one year. At that, it is necessary to make sure that the trader did not allow serious slippages (his portfolio was not in the red by more than 10-15%) over this period.

  • On the eToro platform, you can choose traders, who have shown positive financial results in the period from one month to 2 years. We set the filter for over 10% of profitability over the past two years. The system gave us 8,688 results. That is, of course, too many! This means that we will need to refine our search and set stricter selection criteria.



    Cabinet of eToro
  • Strategy risk assessment.

    Naturally, everybody dreams of over 100% annual return. However, you need to keep in mind that the return rate and risk are, as a rule, directly correlated. The higher the return rate the higher is the risk. We need to find a healthy balance between the desire to earn a lot and a critically important need to preserve capital.

  • You can assess the trader’s risks by analyzing his personal statistics in detail. You need to find out the maximum slippages, the number of loss-free months the strategy has shown and the number of performed traders. You need to delve into details of the trading strategy, because averaging parameters over long time intervals can be misleading. If the trader’s return is 50% in one month and the next month he loses 30%, it is a bad option.

eToro algorithms have made our task of risk discovery much simpler. They assess trader’s risk in points based on big data.

From 0 to 2 points – brokers with the lowest risk level;

From 3 to 6 – average risk level;

From 6 and higher – high risk level.

Using Performance – Risk Score, we set conservative search parameters of traders with risk level from 2 to 3.

Cabinet of eToro


  • After applying the new criteria, we received 152 results instead of the previous 8,688. However, the features of eToro for choosing the traders to copy is not limited to that. Of the members who show stable financial results, we decided to choose the traders with the highest return rate. For this, we set the desired return rate at no less than 30% over two years in the search criteria. You can do it using the Advanced-Return filter. As a result, we received 11 options.


    Cabinet of eToro

  • Now is the time to review personal preferences of the trader, his portfolio and other important criteria. These, in particular, include the number of copiers. If nobody is interested in the trader’s profile, maybe he is not as good as it appears.

    Using the example of a trader with the username tradefx525, we can see that he has 747 copiers and that in the past week he earned 1.22%. It doesn’t look bad.


    Copy

  • We also specified that the trader shouldn’t have had slippages by over 5.29% in each specific month over 2 years, which corresponds to our conservative search criteria.


    graffic

Simple guide: how to start copying traders with eToro

After we find the traders that fit our criteria, we go to the next step – copy trading. As we have mentioned above, in order to test the features of eToro platform at this stay, you will need a live or demo account.

Technically, copying traders on Forex is quite simple – it requires only several, but quite important actions:

  1. 1

    At the bottom of the selected traders, you will see the COPY button – you need to press it.

  2. 2

    eToro will open a window with individual copy settings for this specific trader.

    2
  3. 3

    The next important task is to determine the amount you will allocate for each trader. Traders Union experts recommend to start with at least 3-5 traders, which requires at least $600-$1,000. By diversifying your portfolio among different traders, you increase its stability, flexibility and your chances of earning profit.

  4. 4

    It is just as expedient to set up risk management criteria. You need to determine the level of loss, at which the system will have to stop copying the given trader automatically. Since we used conservative parameters for selection of traders on eToro, we will also set a conservative admissible risk level – up to 10%.

  5. 5

    Once you’ve set all important criteria, you can press the COPY button once more.

Our task has been fulfilled here – the trader has been added to the list of the traders you copy.

Additionally, you can copy portfolios on eToro. They are quite well diversified and are managed by several successful traders. This can be a good solution, if you have at least $5,000, which is the minimum investment here.


graffic

In the specified example, the portfolio has shown stable profitability over the past 2 years without substantial slippages.

graffic

After fulfilling all formalities, we formed a pool of four traders and one portfolio. You can monitor it in the Portfolio section on eToro’s web portal. Also there, you can:

  • Remove traders from the list of traders that you copy;

  • Monitor and visualize statistics;

  • Pause copying;

  • Add an amount for copying or reduce it.

As you can see, the chosen portfolio has shown a small return in the first week already. However, it will require over a month for a fair assessment of the results.

Cabinet of eToro

Another good option for starting copy trading on eToro is to monitor recommendations of experienced editors of the portal. They choose traders with a good balance between risk and profitability and offer them on the page of their copy trading system.

Cabinet of eToro

Another good option for starting copy trading on eToro is to monitor recommendations of experienced editors of the portal. They choose traders with a good balance between risk and profitability and offer them on the page of their copy trading system.

Cabinet of eToro

We also recommend viewing a tutorial on how to use eToro copy trading system.

What is specific of copying traders on Forex?

Copy trading on Forex is quite similar to other markets. It is just as important here to really focus on carefully searching for the right broker and traders to copy. Some brokers, including eToro, offer an option of choosing traders who specialized in this market and show great results.

As for the peculiarities, one must keep in mind that the currency market is, usually, calmer in terms of volatility. In order to increase returns, many traders try to use a big leverage. This practice leads to increased risks. That is why it is always important to check the maximum slippages that a trader you plan to copy has had.

High liquidity makes this market attractive for high-frequency strategies. In this case, control over the expenses for paying broker’s commissions will play an important role.

Can you make money from copying traders?

Of course you can. If copy trading did not bring profit to a large number of investors, it wouldn’t have been so popular. However, just as with any investment, there are always risks. You can make a good profit, but you can also lose some of your equity. For this reason, copy trading on Forex should not be viewed as the only area of investment. Do not invest more than you can afford to lose.

The main risks of copying trades

The markets are essentially volatile and the strategies that bring excellent results to traders today may turn out to be totally ineffective tomorrow. Profit in the past does not guarantee returns in the future.

The advice we gave earlier will help you minimize the risks. Let’s repeat the three main recommendations:

  • 1

    Diversification of the portfolio among traders

  • 2

    Monitoring trading history of the trader for the period of one year or longer and excluding the traders that allowed major slippages of the portfolio

  • 3

    Limiting the level of maximum losses for automatic stopping of copying

In addition, it is recommended to invest a smaller share of your capital in higher-risk strategies and the bigger part – into less risky strategies.

What the main costs of copying traders

The costs largely depend on the chosen broker and copy trading platform. For example, on eToro you will pay only for the cost of the transaction – spreads and commissions, if they are charged.

As for the peculiarities, one must keep in mind that the currency market is, usually, calmer in terms of volatility. In order to increase returns, many traders try to use a big leverage. This practice leads to increased risks. That is why it is always important to check the maximum slippages that a trader you plan to copy has had.

High liquidity makes this market attractive for high-frequency strategies. In this case, control over the expenses for paying broker’s commissions will play an important role.

Summary

Copy trading is certainly a quite promising area for making money on Forex and other financial markets. Thanks to this service, even novice traders with small investment amounts can earn a profit at the level of a professional trader. However, one should always keep in mind that profit and risks are always close to each other, which is why one should not overestimate the possibilities of copy trading. Do not forget about the rules of diversification and do not try to chase excess profit, and then you will have a better chance at earning some real profit.

Author:

Grant Adlington
edit

Grant Adlington

Independent trader-analyst

In 2008, he graduated from the London Institute of Banking and Finance, Department of Finance, Investments, and Risk;

In 2009, he became the youngest trader-analyst at Global Invest;

He has 12-years of experience in continuous trading in the Forex currency market.

Expert commentary

Antony Robertson, Traders Union Financial Analyst

At first glance, copy trading seems like a very simple task. Indeed, the platforms are trying to improve usability as much as they can, build the search logic and filters in a way that any customer can understand.

However, this type of investment should be treated just as seriously as any other. Analysis of trader statistics, building an investment portfolio, setting risk management criteria – these are the actions you have to understand, otherwise you risk getting ‘burned’.

If you treat this seriously, your chances to achieve success will improve substantially, but still won’t be guaranteed, simply because that is how the market works – the strategy that works well today may turn out to be unsuccessful tomorrow.

Copying traders reviews

quote

I’ve been with eToro for six months now. I started as a trader, but due to my work load, I simply didn’t have enough time for this. So I decided to try a copy trading service. At first I invested $500 and got +10% to my portfolio in the first two months; then I added another $1,000. Now, I’m watching what happens next. So far, I’m in the black.

quote
Gordon Chandler

Gordon Chandler, 47

IT Manager

New York


quote

Copying traders on FXTM turned out to be a lost time for me. I got hooked on the promise of big returns. At first, things were going well, but as soon as there was volatility on the market, my traders started to slip; I chose different ones, but the picture was mixed there – a month of profit, then a month of loss. In the end I broke even and decided it was good enough. Maybe I wasn’t patient enough.

quote
Riana Young

Riana Young, 28

Sales Manager

Glasgow


quote

Huge profit is the thing that one should not expect from copy trading. Of course, you may get lucky, if you choose a good trader at the right moment. However, often, those who have big profit later lose it just the same. I believe that the ideal strategy is to build a pool for copying several traders with conservative strategy. The chances to get 15-20% annual profit are much higher than 150%.

quote
Sean Fulton

Sean Fulton, 33

Business owner

Indianapolis


quote

My experience with ZuluTrade turned out to be fully successful. The platform is very convenient, with many filters that can help you choose the strategy to any taste. There are a humongous number of traders. I use a portfolio. I invest the investment part into conservative traders that trade fundamental analysis and the speculative part – into highly profitable traders. In reality, the result is more or less the same. Still, I dream of getting at least some excess profit together with somebody!

quote
Robertо Faber

Robertо Faber, 27

Dentist

Madrid


FAQ

What kind of profit can I expect by copying traders?

Profitability depends on many factors. There is no universal answer. Firstly, it is important to choose a good broker with beneficial trading conditions. Secondly, you need to find an effective trader, who shows stable financial results. And, naturally, market situation and other circumstances also play a certain role in this.

Can I lose money by copying traders?

Yes, this is a probability. Trading on the financial market always involves a certain degree of risk. This is why it is important to observe the rules of risk management and not to invest more than the amount you are prepared to risk into financial instruments.

Which broker should I choose for copy trading?

This largely depends on your individual preferences. According to Traders Union expert assessment, eToro currently has the best offer. The broker offers a combination of a convenient copy trading platform, good trading conditions and reliability.

Who is the best copy trading broker today?

As of today, eToro is on the top of the list. The broker boasts the most advanced platform, beneficial conditions for copy trading and the largest choice of signal suppliers.