What Is Copy Trading?
Also known as: Copy Trade, Social Trading
In short
Copy trading is a trading method in which the trades opened by another investor chosen by the user are automatically replicated in the user's own account in proportion to the balance allocated; it is usually offered as a ready-made feature on crypto exchanges.
On copy trading platforms, the person whose trades are copied is usually called a lead trader. The user picks someone by looking at statistics published by the platform, such as past returns, maximum drawdown and number of followers, and allocates an amount for copying. When the lead trader opens a position, the same trade is opened in the follower's account, scaled to the follower's balance. Lead traders often take a certain share of their followers' profits.
The method can be used in the spot market and in leveraged futures. For example, a user who copies, with 200 dollars, a lead trader who opens trades with 10 percent of a 1,000-dollar balance would have a position of about 20 dollars opened in their account.
Copy trading means delegating trading decisions to someone else and does not eliminate risk. Past performance is not an indicator of future results; a single bad trade by a lead trader using high leverage can quickly erode followers' balances. Slippage caused by delayed copying of trades and platform fees can also affect results.
Last updated: · This content is for information purposes only and is not investment advice.