Copy Trading Explained

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The foreign exchange (FX or forex) market is the world’s largest, most liquid market. With an estimated average daily turnover of US$5.1 trillion, it provides skilled traders with huge potential to profit. However, the factors governing this market are complex and far reaching, and the potential for reward is matched by the potential for risk. Forex is such a complicated market that, without the proper training, education and experience, it is very difficult for novice traders to succeed, writes FXTM’s Emma Davidson.

In recent years, we have seen a number of technological innovations designed to increase the accessibility of fx trading, moving it away from the obscure shadows of Wall Street and into offices and living rooms around the world. Copy trading is one such innovation, and it provides investors with limited experience direct access to the markets.

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What is Copy Trading?

Copy trading is, very simply, the act of copying a suitable trader. Investors select traders based on a number of factors, including experience and risk level. Once selected, their accounts will automatically mirror any positions opened or closed by that trader — until the investor chooses to stop following.

It’s a partnership, with the investor leveraging the trader’s experience and knowledge, while the trader takes a percentage of any profitable trades.

What are the Advantages of Copy Trading?

The main advantage of copy trading is how accessible it makes the fast-paced, complicated forex market.

Their success, however, is dependant on the skill and judgement of the trader they choose to mirror. The forex market presents as many risks as rewards and, while investors stand to profit from successful trades, they will also lose on unsuccessful ones. It is important to choose a forex trader who matches your investment objectives and (crucially) risk profile. Some investors are happy to shoulder greater risks for greater potential rewards, while others would prefer to follow a trader with a more measured approach to forex trading.

How to Find the Best Forex Traders

Finding suitable forex traders to copy is simply about doing your research. The FXTM Invest platform provides investors with access to hundreds of Strategy Managers, all of whom can be filtered based on performance history, fee charged, risk level, days active and maximum drawdown. Because the forex market is so volatile and difficult to judge, you need multiple parameters and quality measures to ensure you find a trader suited to you.

Whatever your goals and objectives for copying forex traders, FXTM Invest may have the Strategy Manager to suit you. Find your perfect partner, and start copy trading today.


Disclaimer: This article comprises of personal opinions and ideas. It should not be construed as containing investment advice and/or solicitation for any transactions in financial instruments and/or a guarantee or prediction of future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available, and assume no liability as to any loss arising from any investment based on the same. Past performance does not guarantee future returns.

Risk Warning: Trading Forex and CFDs involves significant risk and can result in the loss of your invested capital. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

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