What Is Copy Trading – A Beginner’s Guide

Introduction: What Is Copy Trading?

Copy trading is an online investment method that allows you to automatically follow and mimic the trades of experienced traders as they happen. Instead of having to study the markets or make decisions on your own, you can choose a professional trader (also known as a “signal provider”) to follow. Your investment account will then automatically match the trades they make, based on how much money you decide to invest.

This method allows beginners to get involved in markets like forex (foreign exchange), equities, cryptocurrencies, and CFDs (contracts for difference) without needing to have a lot of technical knowledge or constantly check the market.

Example:

For example, if the trader you follow opens a trade worth $1,000 in EUR/USD, and you decide to invest $500, your account will automatically open a trade worth $500, which is half of what the trader is investing.

Copy trading is popular on platforms like eToro, ZuluTrade, and NAGA because it combines social networking with investing. This means that newcomers can learn by watching how professionals trade and possibly earn returns at the same time.

How Does Copy Trading Work?

Copy trading links your investment account to a professional trader’s account, so every trade they make is automatically mirrored in your account in real-time and in proportion to the amount of money you have set aside for copying.

Step-by-Step Process

• Choose a Copy Trading Platform: Use popular platforms like eToro, ZuluTrade, or NAGA. These platforms have networks of professional traders whose performance data, risk levels, and trading histories you can review.

• Select a Trader to Follow: Look at each trader’s profile, which includes their past performance, risk level, preferred markets (like forex, stocks, or crypto), and trading style.

• Allocate Funds: Decide how much money you want to invest in copying that trader. Your trades will then mirror theirs according to your investment amount.

Example: If you invest $1,000 and the trader opens a $10,000 position, your account will automatically open a trade worth $1,000, which is proportional to your investment.

• Automatic Execution: When the investor enters or exits a position, your account will instantly and automatically do the same.

• Monitor and Adjust: You have the option to pause, stop copying, or change your allocated funds at any time.

Fees

Most platforms earn money through spreads (the difference between buying and selling prices), commissions, or a percentage of profits. Always check the fee structure before you start.

Tip for beginners: Start with small amounts and consider copying more than one trader to spread out your risk.

Types of Copy Trading

There are different ways to engage in copy trading, depending on your goals, risk tolerance, and the platform you choose.

• Automatic Copy Trading: This is the most common method where your account automatically mirrors every trade of the selected trader in real-time. It’s perfect for beginners who want a hands-off approach.

• Manual Copy Trading: You can follow seasoned professionals, but you have the choice of which trades to replicate and when. This gives you more control and a chance to learn market analysis.

• Social Trading: This combines trading with social networking. You can follow traders, share insights, comment on strategies, and copy trades directly from their posts or profiles.

• Signal Copying (Mirror Trading): You subscribe to trade signals from expert professionals or automated systems. When a signal is triggered, it automatically executes the same trade in your account.

Beginner Tip: If you are completely new, start with automatic copy trading, and then try manual or social trading as you become more comfortable and knowledgeable about the market.

Why Try Copy Trading? (Advantages)

This method is gaining popularity due to its unique benefits for beginners and busy investors.

• Easy Access for Beginners: You can start trading without needing a lot of market knowledge or years of experience. By following expert investors, you can learn by observing their strategies while gaining market exposure.

• Time-Saving: There’s no need for constant research or monitoring of charts. Trades are executed automatically, making it ideal for those with limited time.

• Diversification: You can copy multiple traders across different markets like forex, stocks, and crypto, which helps spread your risk instead of relying on just one strategy.

• Transparency: Reputable platforms provide detailed statistics about investors, including their performance history, risk scores, and trading styles, helping you make informed choices about whom to follow.

• Flexible and Scalable: You can start with a small investment and increase or decrease the amount as you gain confidence. You can also stop copying at any time without penalties.

Tip: While copy trading makes investing easier, your success still depends on choosing skilled traders and managing your risk carefully.

Risks of Copy Trading

While copy trading simplifies investing, it also comes with important risks that you should understand before getting started.

• Market Risk: Even skilled traders can lose money, which means if the trader you follow loses money, your account will also reflect those losses.

• Dependence on the Trader: Your success relies on the skills and decisions of the individual you choose to follow. If they change their strategy suddenly or experience a series of poor trades, your results will be impacted.

• Overconfidence: Because trades are automated, it’s easy to underestimate the risks or invest too much money. Relying too heavily on a single trader can lead to significant losses if their strategy doesn’t work.

• Platform Risk: If the copy trading platform has technical issues or isn’t regulated, it could affect your trades or funds. Always choose a regulated and reputable broker.

• Fees and Costs: Some platforms charge performance fees, spreads, or commissions, which can reduce your overall profits over time.

Important: Diversify by copying multiple traders, start small, and regularly review your performance. Copy trading is simpler than manual trading, but it’s not without risks.

Who Uses Copy Trading?

Copy trading attracts a variety of participants, from beginners to experienced investors, each with different goals:

• Beginner Traders: New investors often use copy trading to learn by observing professionals while engaging in the markets without making all the decisions themselves.

• Busy Investors: Those who don’t have time to research or actively manage their investments rely on copy trading to gain exposure to forex, shares, cryptocurrencies, or CFDs while focusing on other commitments.

• Experienced Traders: Skilled investors sometimes follow other experts to diversify their strategies or learn about different markets or trading styles.

• Long-Term Investors: Some long-term investors allocate part of their portfolio to copy trading for short-term opportunities or to diversify beyond traditional investments like shares or ETFs.

Whether you’re a complete beginner or an experienced investor looking for
diversification, copy trading offers a flexible way to access global markets while benefiting from the expertise of seasoned traders.

How to Start Copy Trading

Starting with copy trading is straightforward if you follow these steps:

Step 1 – Choose a Reputable Platform

Select a trustworthy copy trading platform with strong security, transparent fees, and a good selection of traders to follow.

Step 2 – Open and Verify Your Account

Create an account and complete the platform’s KYC (Know Your Customer) verification process, which usually requires proof of identity and address.

Step 3 – Explore and Research Traders

Browse the available traders and examine their:

• Performance history

• Risk score

• Trading style (forex, stocks, crypto, etc.)

• Average trade duration

Look for consistency rather than just high short-term returns.

Step 4 – Allocate Your Funds

Decide how much money you want to allocate to each trader.

Example: If you allocate $1,000 to a professional and they open a $10,000 position, your account will automatically mirror the trade at the same ratio.

Step 5 – Monitor and Adjust

Although copy trading is mostly hands-off, it’s important to:

• Regularly review performance

• Adjust allocations as necessary

• Stop copying if a trader’s risk level or results change

Step 6 – Manage Your Risk

Diversify by following multiple investors instead of concentrating all your funds into one strategy. Start small and increase your allocation as you gain confidence. Set personal limits for your overall risk.

Beginner Tip: Consider using a demo account first to practice and understand how copy trading works before investing real money.

Quick Glossary of Copy Trading Terms

• Copy Trading: A method where your account automatically replicates the trades of a professional.

• Trader/Signal Provider: The experienced professional whose trades you replicate.

• Allocation: The amount of money you dedicate to copying a specific trader.

• Social Trading: A feature that combines trading with social networking, allowing you to follow, interact with, and copy traders.

• Risk Score: A rating that indicates how aggressive or conservative an individual’s strategy is.

• Stop-Copy: A feature that allows you to stop following an individual and close all replicated positions immediately.

• Performance Fee: A percentage of profits that some platforms charge for successful trades copied from a professional trader.

• Diversification: Spreading your funds across multiple professionals or strategies to mitigate risk.

• Mirror Trading: Another term for copy trading, where your account automatically replicates another individual’s strategy.

• Demo Account: A practice account where you can test copy trading with virtual money before risking real funds.

Copy Trading Examples

To help you understand how this method works in real situations, here are two simple examples:

Example 1: A Winning Trade

• Setup: You allocate $1,000 to copy a professional forex trader who invests 10% of their account in a EUR/USD buy trade.

• Action: Your account automatically opens a EUR/USD trade worth $100 (10% of your allocation).

• Outcome: The trader closes the position for a 5% gain, and your account mirrors the result.

• Result: You earn a $5 profit on that trade (minus any platform fees).

Example 2: A Losing Trade

• Setup: You copy a crypto trader with the same $1,000 allocation. They invest 20% of their funds in Bitcoin.

• Action: Your account mirrors the trade with a $200 Bitcoin position.

• Outcome: Bitcoin drops by 8% before the trader closes the trade.

• Result: You lose $16 (8% of $200), proportional to your allocation.

These examples show how your profits and losses are directly linked to the trader you copy and the amount you invest.

Final Thoughts / Next Steps

Copy trading provides a simple way to participate in financial markets by automatically mirroring the trades of experienced traders. It’s perfect for beginners who want to learn from professionals and for busy investors looking for a hands-off trading approach.

If you’re ready to start, here’s a quick roadmap:

• Educate Yourself First: Understand how copy trading platforms work, including their fees, risk management, and how to evaluate trader performance.

• Start Small: Begin with a modest investment or use a demo account to practice before putting in larger amounts.

• Diversify Your Portfolio: Follow multiple traders with different strategies or markets (forex, crypto, stocks) to reduce risk.

• Monitor Performance: Even though it’s mostly hands-off, regularly review the traders you follow and make adjustments as necessary.

• Choose a Reputable Platform: Use regulated platforms for added security and transparency.

Remember: This method is not without risks. Your success depends on the traders you choose to follow and how well you manage your investments. Focus on achieving consistent, long-term results rather than trying to make quick profits.

With the right preparation, this strategy can be a powerful tool to grow your investment portfolio while learning from experienced traders.

Continue Your Trading Journey

If you’re interested in exploring other growing markets, check out our next guide, “What Is Prop Trading – A Beginner’s Guide,” which explains how prop trading works, the risks involved, and how to get started safely.

When you’re ready to begin this approach, be sure to choose the best platforms. Our “Best Copy Trading Platforms of 2025” page compares trusted platforms side by side to help you find one that suits your goals.

Legal disclaimer

This content is for educational purposes only. It is not financial advice or a solicitation to buy or sell any security or derivative. Trading involves risk, and past performance does not guarantee future results. Always verify broker licensing with official regulatory authorities.

FAQs

What is copy trading in simple terms?

Copy trading lets you automatically mirror the trades of experienced investors. When they buy or sell an asset, your account executes the same trade in real-time based on the funds you allocate.

How does copy trading work?

You select a trader on a platform like eToro or ZuluTrade, decide how much to invest, and the platform copies that trader’s moves into your account. Your profit or loss matches the trader’s performance, scaled to your investment amount.

Is this approach illegal?

No, copy trading is legal in most countries as long as you use a regulated broker or platform. Always check that the platform is licensed by a reputable authority to ensure compliance and safety.

How profitable is copy trading?

Profitability can vary. Some traders achieve consistent gains while others may incur losses. Your results depend on the skill of the traders you follow, market conditions, and how well you manage risk and diversification.

What is an example of copy trading?

For instance, if you allocate $1,000 to copy a trader who invests 10% of their account in a EUR/USD trade, your account will automatically open a $100 trade. If the trader earns a 5% profit, you also gain $5 (minus platform fees).

Is this method good for beginners?

Yes, it is beginner-friendly because it doesn’t require in-depth market analysis of the market. It’s a hands-off way to gain exposure to forex, stocks, or crypto while learning from experienced traders.

Can I make money with copy trading?

Yes, but profits are not guaranteed. Your success relies on the investors you choose to follow, their strategies, and overall market conditions. Diversifying across multiple traders can help reduce risk.

How much do I need to start using this method?

Most platforms allow you to start with as little as $100–$200, although some professional traders may require a higher minimum allocation.

Is copy trading risky?

Yes, all trading carries risk, and you can lose money if the traders you copy perform poorly. Market volatility, sudden strategy changes, or following just one trader without diversification can increase potential losses.

Do I control my funds?

Yes, you can stop copying a trader, adjust your allocation, or close individual trades at any time through your platform.

What fees are involved?

Common fees include the spread (the difference between buy and sell prices), performance fees, and sometimes small commissions. Review the platform’s fee structure before starting.

Is copy trading legal?

Yes, it’s legal in most regions, but always select a platform regulated by authorities to ensure compliance and security.