A service that automatically replicates another trader's positions into your account in proportion to your balance.
Copy trading automates the process of following an experienced 'signal provider' or 'master trader': the platform monitors the master account and opens the same trades in the follower's account simultaneously, with position size scaled to the follower's equity. If the master opens a 1-lot EUR/USD trade and the follower has one-tenth of the master's capital, a 0.1-lot trade is automatically opened in the follower's account.
The appeal for beginners is clear - market exposure without the need to develop or execute a strategy independently. The risk is equally clear: followers bear the full downside of the master's strategy without having independently verified its edge. A strategy that showed 80% win rate over six months can still suffer a 40% drawdown; followers with lower risk tolerance than the master may find themselves unable to stomach the volatility and close out at the worst point.
Due diligence when selecting a signal provider should include: the length of the track record (minimum 12 months of live trading), maximum drawdown relative to returns (a Sharpe ratio or profit factor metric), whether results include all costs, and whether the provider's strategy is explained clearly enough to understand its risk profile. ZuluTrade, eToro's CopyTrader, and MetaTrader's Signals Marketplace are the main retail copy trading platforms, each with slightly different fee structures and provider ranking algorithms.
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