Copy trading allows traders to copy positions of other expert traders with a software application. It allow you to copy specific strategies based on your personal strategy and preferences. In this article, we’ll be looking at exactly what copy trading is and who it works for, as well as going over which are the best copy trading apps and platforms available.
We’ll also take a look at the risks associated with copy trading as well as its benefits to investors.
If you’re looking for more information on the topic, read to the end of the article where we will go over some other important questions you may have about copy trading. You can find popular guides on online investing here.
Top Rated Copy Trading Platforms 2021
In this roundup, we’ll look at the best copy trading brokers available. There are a few important aspects you need to take into account before committing to them, such as fees and commission, regulation, depositing and withdrawing money, and more.
- eToro – Best Rated Copy Trading Platform Overall
- AvaTrade – Best Forex Copy Trading Broker
- IC Markets
- Vantage FX
- Octa FX
eToro is one of the most popular copy and social trading platforms in operation today and with good reason. eToro offers zero-commission stock trading and pioneered copy trading.
They have one of the best mobile apps on the market, with all the functionality of the browser version available in your pocket.
|A large variety of assets, including cryptocurrency||Customer Service|
|Copy trading||Some Fees|
|Financial reports and news items|
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. eToro USA LLC does not offer CFDs, only real Crypto assets available.
AvaTrade is a popular social trading platform from Dublin, Ireland that launched in 2006.
They have a sterling track record in regards to customer support as well as cybersecurity.
The platform has a large user base, so there are lots of options of strategies that users can copy that work for them. The platform supports trading across Forex, CFDs, and stocks.
The browser platform offers users a selection of three different UIs, but they are all quite tricky to use. Information isn’t ordered neatly which can make sifting through thousands of potential signal providers a chore.
|Well Regulated||Demo-account limited to 21-days|
|Pricing Structure||Inactivity fees|
XM is an online trading broker owned by Trading Point Holding. They trade primarily in CFD and Forex markets. They are regulated in many regions across the globe, the most stringent of which is Australia. XM’s fees and commissions are on the low side, and their opening deposit is only $5. This is attractive to new traders who are looking to try out copy trading without risking too much initial capital.
|XM has a wide host of educational tools||A limited number of base currencies are supported|
|Low trading commission||Instruments limited to CFDs and Forex|
|Easy account opening|
PepperStone is an online copy trading platform launched in Australia in 2010, later expanding to add offices in London in 2015. They adhere to the regulations in both regions.
They are independently owned and as such are not listed on the stock exchange. They offer leverage margins of up to 500:1. This is useful for traders but could potentially lead to large losses.
They offer a variety of accounts, including ECN and STP accounts to their users. There is also the option for Islamic-friendly investing accounts which are available on request.
|Free deposits and withdrawal||Limited educational tools|
|Negative balance protection||High commission on trading CFDs|
|Low inactivity fees|
IC Markets is another Australian-based trading platform, this time started in 2007. They are regulated in Australia, Cyprus, and Seychelles.
Opening an account with IC Markets is a bit of a chore. There is a day-long waiting period to start trading and the opening deposit amount is higher than most other platforms on this list.
|Low fees for Forex trading||No protection against negative balances|
|Wide range of trading platforms||A limited number of research and educational tools|
|High levels of regulation and safety|
Vantage FX is an international online Forex broker with offices across the world. They are regulated by the ASIC in Australia and the FCA in the United Kingdom.
Depending on the account, minimum opening deposits are anywhere between $200-$500.
Vantage FX has a suite of automated trading plugins called SmartTrader aimed to facilitate simple trading. It adds a host of useful features to the MT4 (MetaTrader4) platform, such as picking up trade signals from third-party platforms.
It has a competitive fee and pricing structure which, aside from the relatively high minimum deposit, is appealing to first-time traders.
|Vantage has a high-speed network infrastructure, ensuring fast and accurate trade signals||Limited access to research and educational tools|
|Low commissions on Forex trades||Many features, such as free VPS and SmartTrader, are only available to $1000 accounts|
HYCM, or Hynep Markets, was launched in 2007 focusing specifically on bringing trading to markets in Asia. Since then, it has expanded to include offices in Europe and the US. Over the years, they have been earned several awards for customer service and broker support.
HYCM offers a range of account types that differ in terms of commission fees, minimum trade volumes, and spreads.
The biggest draw for HYCM is the range of services it offers to its traders, both novice and professional. New traders can choose from thousands of high-performance signal providers on the platform.
|HYCM hosts frequent seminars and webinars on trading||High commission on spreads|
|A sturdy reputation||Be careful of high leverage rates|
|Multiple trading instruments|
OctaFX has been in operation since 2011, operated out of St. Vincent Islands and the Grenadines. They have since expanded into Cyprus and are regulated by CySEC.
Their platform has access to over 30 Forex pairs available to trade as well as a couple of stock indices and cryptocurrencies. OctaFX is one of the few Copy Trading platforms that provide trading of commodity metals.
OctaFX has some of the most competitive commission rates among brokers. They also guarantee zero slippage or requotes of Forex pairs.
|Unlimited free demo account||Not available outside the EU|
|Zero commission on deposits and withdrawals||No telephonic customer support|
|Varied account options to suit all types of traders|
Copy Trading vs Social Trading vs Mirror Trading
When you start trading, you might be bombarded by all these terms. It can get confusing to try and unpack what each different type of trading means. The differences between these types of trading are small but important.
Copy-trading allows users to select the specific strategy they wish to follow. Copy-trading platforms give their users access to the signal provider’s performance history and other crucial data so that they can choose which signal provider they want to mimic.
Mirror trading is an older trading strategy that has been refined into copy trading through big data. With mirror trading, users have to mirror the strategy of other traders without any manual input.
Platforms will conglomerate signal data from their top-performing traders as a whole, which mirror traders will then follow.
Social trading is the umbrella that both copy- and mirror-trading fall under. Social trading combines the best aspects of social media into trading software, allowing users to chat and swap ideas with each other. The goal is to build a community of global traders.
Copy Trading Software
Retail brokers such as eToro and Avatrade use third-party trading platforms to execute trade orders. There are a variety of platforms that utilize copy-trading software, the most popular of which is MetaTrader 4 and 5 (MT4 & MT5).
These platforms provide the fundamental features that allow users to copy trade by hosting important data on traders and market sentiments.
Before committing to a broker, it’s important to understand what each of these potential platforms uses and what that means to the trader.
MT4 Copy Trading
It is possible to trade directly through MT4. Retail brokers using MT4 conglomerate the many different graphs and spreads them into focussed information that’s easier to digest for most users.
MT4 is the older version of MT5, but many brokers still use it. For most users, the features on MT4 are more than enough to trade accurately. One of the biggest drawbacks of this platform is the lack of an economic calendar to track important dates.
The platform has a strategy tester but it is limited to a single thread.
MT5 Copy Trading
MT5 was released in 2010. Despite its expanded list of features, many brokers have been slow to adopt it.
It has an economic calendar that is useful to gain a wider perspective of global trends.
One of the most important aspects of MT5 is the embedded community chat. This allows users across all platforms to swap tips and tricks. This is useful as it massively expands the user base of any brokerage to include many traders who use different firms.
cTrader Copy Trading
cTrader Copy is an overhaul of a previous system known as cMirror. Although it is not as prolific as MT4 or 5, it’s used widely among more niche brokers.
They are focused on social trading and allow any traders to become signal providers, as opposed to only the highest performing. Also, each signal provider can choose how much commission to charge their followers.
This creates a competitive market where the most profitable signal providers quickly rise to the top.
DuplieTrade Copy Trading
DupliTrade offers strategies in stock, CFDs, and Forex, but the vast majority focuses on Forex alone.
While it offers the least amount of instruments to trade, it provides the most in-depth analysis on traders of any platform on this list.
DupliTrade allows users to examine eleven different categories of signal providers, including full trading history and gross profit.
Although their trade instruments are limited, maximized transparency gives copy traders a good chance of following a winning strategy if they put in the research.
Should You Start Copy Trading?
Brokers argue that copy trading reduces the risk traders take on when they start trading. This holds some truth but isn’t entirely accurate. We’ve put together a list of the pros and cons of copy trading.
- Follow the strategies of the best traders on your platform and earn proportional profits.
- Auto trading limits time investment. Trades can be done while you sleep.
- Many platforms allow you to start and stop copy trading easily.
- Little experience of trading needed to start.
- Even the most profitable traders don’t always win.
- Copy-trading costs more in commission than manual trading.
- You will always be slightly behind the trend if you copy other traders.
How to Pick a Copy Trading Broker?
Fees & Commissions
Brokers charge their users in order to make money for themselves. Some brokers, like eToro, don’t charge much for commissions on trades, but they take a cut of every trade’s profits.
Inactivity fees are also something worth considering. Brokers penalize traders who leave their accounts dormant without trading. These fees can add up if you’re not paying attention. Many signal providers charge a commission on each copied trade.
The regulations that a broker must adhere to depends on the territories in which that broker has offices. Traders should familiarise themselves with all the regulations of a broker before trading with them.
Authorities can set rules determining any aspects of trading, including leverage amounts and tradable instruments. Leverage maximums are different all over the world. In the US, they are limited to 50:1. In the UK and EU, it is limited to 100:1
Whether your funds are kept in segregated accounts will also depend on the regulations of the area.
Brokers are in charge of keeping your money safe, so you need to be sure that you can get hold of them if something goes wrong. A concern that many traders have is that their broker might not respond to them.
If you want to reach your broker over the phone, odds are you will only be able to during their office hours. Since you can trade with brokers from all over the planet, time-zones can make communication between trader and broker difficult.
There are many industry awards that are given to brokers with good customer support. AvaTrade has won awards for their support many times.
Before committing to a broker, you should check the methods you can use to contact them.
Deposit and Withdrawal Methods
Each brokerage will have its own method by which traders can deposit and withdraw money into and out of their accounts.
Some companies, such as eToro, allow users to select withdrawing money through direct bank transfers, PayPal, or credit card payments.
It is becoming increasingly common to allow traders to withdraw their funds in some form of cryptocurrencies, such as Bitcoin or Etherium. These are viable options, but we would recommend steering away from platforms where that is the only option.
Risks Of Copy Trading
Copy-trading comes with risks, like all forms of online trading.
Trades are predictions that a stock or currency will perform a certain way, that it will either increase or decrease in value. As sure as a prediction may seem, no-one can claim to be 100% sure how a market will behave.
New traders must be especially cautious when trading using leverage. It’s a useful feature that brokers offer to increase your trading power using limited capital.
While it could massively increase earnings on profitable trades, losses incurred using leverage could be more than your initial investment.
Best Copy Trading App
When it comes to mobile apps, e-Toro stands out against its competitors. It was built with user-friendliness in mind. It is the most streamlined app of all the brokers on this list. Information is easy to sort through and clearly communicated. It is one of the few apps available that has the full functionality of its desktop counterpart.
Copy Trading Cryptocurrencies
If you’re looking to get into the increasingly popular crypto markets, eToro is the best platform to use.
They have a wide range of cryptocurrencies including Bitcoin, Etherium, and Lightcoin. All eToro users are given access to a crypto wallet that holds and sorts whole and fractional coins.
eToro also has crypto copy-portfolios for traders looking for a more passive approach to crypto trading.
Forex Copy Trading
If you’re looking to trade Forex pairs, AvaTrade is the clear winner. Because of their regulations, they are considered low-risk forex brokers.
They have access to an impressive 55 currency pairs to trade. Additionally, they have some of the lowest commission charges of any retail Forex broker.
Yes, copy trading is completely legal all across the world. The most important aspect to look at concerning legality is which region a broker is regulated in and whether they adhere to those regulations.
Anyone can make money with copy-trading provided they copy a profitable signal provider. Traders looking to make money should do as much research as they can before copying another trader.
Not every trader will be profitable. Traders could copy signal providers who don’t make high returns. Most platforms allow users access to trade history to try and mitigate this.
Provided you’ve read this guide, starting copy trading is easy. Pick out the platform that you think best suits your needs. We’ve gone over some of the most popular in this list, but there are hundreds more out there. Make sure you’ve researched commission charges and deposit amounts before you open an account anywhere. Once you’ve opened an account, find a signal provider and research their trade history. Try and find one that makes a profit on average before you copy them.
One easy way to vet a trader is by looking at the amount of money other traders have invested using their strategies. Do not include demo-accounts in this tally. If a trader has large amounts of capital following their trades, odds are they’re a trusted provider.
It’s also helpful to look at a trader’s returns. Negative returns should be avoided. But returns that are too high can also raise some red flags.
Good annual returns are normally around 70%. Anything significantly higher than that is most likely down to blind luck.