Pretty much what it says on the tin. Copy trading is a type of technology that lets ordinary investors copy the trades of other investors. This can be a game changer for those just starting out with investing and trading because it means you can mimic the moves of experts (or more experienced traders) if you’re not comfortable placing your own trades.
In theory, you automatically replicate the actions of other investors, imitating their every move without lifting a finger. You follow them, they make trades, you automatically copy those trades; and hopefully, if they’re successful, so are you. However, the opposite is also true – their failures become your failures too. There’s no such thing as a free lunch, even if you happen to have the same lunchbox as your neighbour.
In most cases, copy trading works by using a separate piece of software alongside your existing trading platform or brokerage. However, some trading platforms now have integrated software that allows you to browse and copy other trades. The basic premise is that by copying the trades of someone with more experience, you can improve your chances of being successful, but that’s not always the case.
Essentially, when you decide to copy someone, you can opt to automatically copy what they do (whether that’s buying or selling). Usually, you don’t have to copy the same monetary amount, just the type of trade. For example, if they’re placing a buy trade with £10,000 you can copy it with a much smaller sum of say, £100 for example. Always check this though so that you don’t end up investing more than you’re comfortable with.
Certain platforms will also let you choose whether to copy all trades or just a portion, but that can complicate things as trading often relies on the assumption that some moves won’t work out. So if you cherry pick your trade to copy, you could end up just copying all the losing trades from that investor.
Finding the best copy trading platform to use is going to depend largely on your preferred investing strategy and which interface you like using for copying trades.
There are several brokerages operating in the UK to choose from that offer copy trading. Each can differ in terms of complexity and other features, here are some popular examples of copy trading platforms:
With most of the platforms that allow copy trading, you can also opt to become a copied trader. So, you can attempt to build up a following and get other investors to copy your trades.
You’re probably not going to want to do this until you’ve got plenty of experience under your belt and a proven track record of successful trades (otherwise no one is going to want to copy you, obviously). But, if you do reach this stage, you can get paid commissions and bonuses based on your trading performance (and sometimes the size of your following).
Here’s a straightforward step-by-step guide if you’re considering copying the trades of other investors:
"It depends. Copy trading can be a useful tactic if you’re dead set on wanting to trade but have minimal experience. However, it’s still an investing method that sits on the higher end of the risk spectrum. Typically, beginners and less-experienced investors shouldn’t really be looking to trade at all. It’s often better to aim for steady growth with strategies that are more long-term focused.
That being said, if you want to trade and are just starting out, copying the moves of traders with much more experience and a track record that you can see for yourself is potentially a better plan of action. Just keep in mind that copying traders who’ve been successful in the past isn’t a guarantee of future success or a simple way to make loads of money (otherwise everyone would be doing it). There’s plenty of risk involved and this has to be weighed up against the possibility of any profit."
It can be. For example, data and statistics from ZuluTrade show that uninterrupted copy trading (mimicking a trader’s move exactly without tinkering or making adjustments) can have a success rate of between 73% and 79%. This is pretty much a complete flip of the odds of retail investors who trade manually, who have roughly a 70% chance of losing money.
However, this means you’ll need to copy the exact moves and there is still a fairly significant chance you can lose money. One interesting component is that shorter timeframes seem to perform better than longer timeframes (for example, 3 months of trading has a higher success rate than 12 months). So the longer you spend trading (rather than long-term investing), the more the odds of coming out on top swing against you.
Here’s a quick look at the possible benefits of copy trading:
These are some of the important drawbacks you need to consider:
On the investing platform eToro, you’ll see both full-time and part-time investors among the “most copied” in its renowned CopyTrader programme, which lets novices shadow the moves of more experienced investors. It’s worth remembering that even top investors have their downfalls, though. And since it’s useful to hear about these, we asked some top traders to share both wins and regrets.
Copy Trading does not amount to investment advice. Your investments’ value may go up or down. Your capital is at risk.
Name: Jorden Boer (@Jordenboer)
Copiers: 6k+
Followers: 25k+
Strategy: Trading the short-, medium-, and long-term simultaneously.
Name: Ingvar Rueckemann (@Ingruc)
Copiers: 4k+
Followers: 70k+
Strategy: Long-term strategy based on undervalued stocks from value and growth.
Name: Neza Molk (@Nezatron)
Copiers: 3k+
Followers: 800k+
Strategy: Investing in companies with good financial health and that offer a product or service that solves problems.
I have been investing since 2002 after starting as a market maker (options trader) on the Amsterdam Stock Exchange in 2000.
I have been curious about the financial markets since I was a teenager, and occasionally “bought” stocks via virtual portfolios. Of course that’s not the same thing as investing real money — I started about 8 years ago, which was really the first time I felt that I had sufficient capital that I could use for investing and afford to lose if it wouldn’t go well.
I bought my first stock when I was 20, a pharmaceutical company. Just before the coronavirus crisis started, I opened a virtual account on eToro, realised how easy it is and fell in love with the possibilities it offers.
I had personally not built up a pension, so it was imperative that I took care of my financial future by becoming financially independent myself.
The main goal was (and is) to build wealth over time by putting surplus cash to good use.
For me the stock market always seemed like the better option for investing compared to other products such as savings accounts, insurances and pension products.
I find the corporate world fascinating and personally take great joy in seeing markets and single companies develop over time.
I have always been concerned about my money and savings. When I got my first student job I realised how much effort you must put in to earn a few bucks. I didn’t want to spend it right away and later realised that if I don’t do anything with my savings, money in the bank account will slowly lose its value. I started to look at possible solutions, and investing was the best option for me.
I’m currently a full-time eToro Popular Investor, dividing my time between following the markets, buying or selling stocks and studying for Level 4 Wealth and Investment Management which will help me become an eToro Elite Pro Popular Investor.
I am a full time investor, so I spend most of the day monitoring and analysing the markets. That usually means absorbing and sorting through a lot of different information, deciding what’s relevant and how it might impact single stocks and my strategy. That’s a full-time job, but luckily I really enjoy what I do.
After work in the laboratory, I dedicate several hours a day to my portfolio. I don’t make changes to my portfolio every day, but I research and analyse different companies, macroeconomic events, and investing news. I also listen to several different podcasts and YouTube channels. I like to read books which are more focused on one topic and contain a lot of useful information. During each earnings season I regularly analyse earnings reports, which requires a lot of reading time.
The most important thing I have learned is not to try and time the markets, but instead be invested as this will always result in profits in the long term. However, this is dependent on stock selection.
The good old adage “time in the market beats timing the market” is certainly true for a long-term investor. Instead of trying to find the optimal entry point it’s better to be invested constantly with a consistent strategy.
I have learned to trust myself, believe in my own research, and don’t follow the herd. With that, I have grown as an investor and as a person.
The crypto market has evolved tremendously. Even though I don’t trade crypto, I do regret not investing in it and seeing the evolution of digital payments and blockchain technology ten years ago.
Usually I don’t have trading regrets. Of course, sometimes you see a stock going up, you remember you looked at the stock just some weeks ago but didn’t buy it. There is a glimpse of regret in that moment. However, I am really digesting that very quickly, because in hindsight it’s always easy to say “I should have bought” – but the fact is that I did not. And that decision to not buy at the time was based upon good reasons, so no need to be bitter about it.
I don’t have any regrets. “If, if, if” are in my opinion the most dangerous words in investing. If I had invested in Apple in 1980 I would be rich. Yes but you didn’t, so go on and stick to your strategy.
Copy Popular Investors with part of your portfolio and start off trading some stocks yourself. Keep some spare cash to use for opportunities which arise. Add funds monthly to build up your wealth over time. And be patient…..don’t go for 50% profits in one month and don’t quit after being down 3%.
Be curious, get involved in the markets, find out what kind of investor you want to be.
Explore, learn, and don’t be afraid. Start reading, listen to podcasts, follow the news about world markets and do your own research. With all of that, you will shape your goals and develop a strategy that suits your needs. Don’t be afraid to try something new; we are learning our whole life and it might be scary at the beginning, but this is not a reason not to try. It might be helpful to find yourself an experienced mentor who can guide you. It is easier if you have a reliable person beside you who can motivate and advise you when you feel lost. When I was at the beginning of my investing journey, I tried to remind myself that every one of my role models was at the same point once, and they made it.
Being a Popular Investor means that you have the very important task of informing followers and copiers of your strategy and answering questions correctly. You build up a personal relationship with many investors as they reach out on a daily basis searching for information and the opinions of Popular Investors.
I am very honoured that so many people trust me by copying my portfolio. It’s a great feeling to be able to share and help people make sense of the financial markets and how to get involved in them.
Being a popular investor has completely changed my life. I love investing and eToro made it possible for me to share my thoughts and actions with others. I feel a great responsibility for all my copiers and it gives me even more motivation to continue my work.
Copy trading can be an interesting way to dip your toes into the trading waters even if you’ve a relatively shallow pool of investing knowledge. It allows you to piggyback off more experienced traders and potentially make profits while you continue to learn.
However, this is still a risky investing strategy, that not only comes with market risk but also the danger of picking a poor trader. Past performance doesn’t dictate future results and even the best traders won’t consistently make winning trades over long periods of time. So make sure you’re fully aware of the risks and do plenty of research before diving in.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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