IQX Trade Group

The Ultimate
Guide for Copy Trading

The Ultimate
Guide for Copy Trading

Copy trading revolutionizes the world of investing by allowing individuals to effortlessly replicate and profit from the successful trades of experienced traders.

What is
Copy Trading?

Copy trading offers a straightforward concept that lives up to its name. By utilizing this method, you have the opportunity to replicate the trading positions of another individual. The process is simple: you determine the amount you wish to invest and automatically mimic all the actions taken by the selected trader in real-time. Whenever they execute a trade, your account will follow suit and replicate that same trade.

One of the key advantages of copy trading is that you don’t need to actively participate in the decision-making process of each trade. Additionally, you enjoy identical returns on every trade as the trader you are copying. This approach allows you to leverage the expert knowledge of another trader without surrendering control over the outcome. You retain the ability to close trades at your discretion and open new ones when you see fit.

By copying the trades of another trader, you stand a chance to profit from their skills and expertise. Remarkably, you don’t require advanced knowledge of the financial market to engage in copy trading. It provides an accessible opportunity for individuals to potentially generate profits based on the success of experienced traders, regardless of their own expertise level.

Based on a recent survey…

  • Approximately one-third of respondents expressed that they perceive a conventional stock market approach as excessively intricate, suggesting that simplification can be achieved through the automated replication of traders’ actions.
  • Roughly one-fourth of investors stated that they contemplated engaging in Social trading during the previous year.
  • Projections indicate that Social trading platforms are anticipated to expand to €40bn in 2020, with an impressive annual growth rate of 96%. Furthermore, these platforms are expected to reach €70bn by 2025, displaying a steady annual growth rate of 48%.

How does copy trading work?

Copy trading simplifies the process of automated trading.

Utilize the available filtering tools on the IQX Trade platform to identify a trader that aligns with your objectives. Consider your preferences and priorities. Are you looking for a trader with a large following, impressive profitability, a specific risk level, substantial managed funds, or a high return on investment? You have the freedom to select a combination of these criteria based on what you personally deem important. The choice is entirely yours.

Determine your desired investment amount and the allocation strategy for multiple managers, if you have chosen to copy more than one trader. It’s wise to maintain a balanced approach and avoid concentrating all your resources in one place. Decide how much to allocate to each selected trader. For additional assistance, we recommend watching our concise video guide, which provides further guidance on this topic.

Once you have chosen your preferred trader(s) on the copy trading platform, the system will seamlessly replicate all their positions in your trading account automatically.

If you are satisfied with a trader’s performance, you have the option to increase your investment by adding more funds. Conversely, to maintain a diversified portfolio and minimize risk, you can reduce your exposure to a specific trader by not allocating excessive funds to them. Remember that you have the flexibility to replace existing traders at any time. However, keep in mind that each trader you decide to follow will require a separate Invest account.

Using the copy trading function does not entail any additional fees, except for the fees charged by the Strategy Manager when they generate a profit. Any standard brokerage fees associated with regular trades will also be applicable to copy trades.

What markets are most suited to copy trading?

Copy trading offers the opportunity to engage in various markets, such as FX, indices, stocks, and commodity markets.

For individuals who are interested in entering the FX market but lack the time or advanced technical skills, copy trading provides a convenient solution. It eliminates the need for extensive learning and saves valuable time.

If you prefer to allocate more of your resources to specific markets, copy trading allows for easy trading across different markets. For instance, if you have limited familiarity with technology stocks but have a keen interest in trading Apple or Netflix, you can easily navigate in and out of different markets to achieve the desired exposure.

Let’s take a moment to refresh our understanding of the FX market, which significantly surpasses other global markets in terms of trading volume:

  • The global FX market has an estimated worth of $1,934,500,000,000, making it the largest traded market by a substantial margin.
  • Compared to the equities market, the FX market is approximately 27 times larger in terms of value.
  • The daily trading volume in the FX market is approximately 53 times greater than that of the New York Stock Exchange (NYSE).
  • Interestingly, more than 85% of FX transactions occur exclusively in major currency pairs, including EURUSD, USDJPY, GBPUSD, USDCAD, AUDUSD, NZDUSD, and USDCHF.
  • If you would like to delve deeper into the world of FX and gain a better understanding of how it operates, explore further details on this topic.

The benefits and risks of copy trading

Risk Spreading and Long-term Trading
Another advantage is the ability to diversify your portfolio, spreading your risk across multiple traders. This approach enables you to navigate market fluctuations over the long term.

Copy trading offers an intriguing and accessible entry point into trading. Thanks to significant advancements in social trading and the proliferation of social trading networks, this avenue is now easily available to individuals.

Enhance Trading Knowledge
By following experienced traders who possess years of expertise and know-how, copy trading allows you to upskill your own trading knowledge. You can observe their activities, replicate their successful trades, and develop your own trading acumen.

Copy trading, like any financial endeavor, involves certain risks that have financial implications. Trading inherently carries high risks and potential high rewards.

Market Risk
Copy trading exposes you to market risks, similar to any trading activity in financial markets. Your capital is at risk as the success of the assets bought and sold by your chosen trader may prove unfavorable, leading to potential losses.

Trader Histories
Selecting a reliable long-term trader to copy can be challenging. It is your responsibility to conduct thorough research and due diligence to ensure you understand the chosen traders. Sometimes, impressive results may seem too good to be true or a trader may be experiencing a temporary hot streak, which could be followed by a period of drawdown.

Execution Risk
Similar to any financial trading, there is a level of risk associated with illiquid assets. It is important to consider how easy it is to exit positions held by the trader. Additionally, factors such as the costs included in the copy trader’s returns and whether the bid/offer spread is already accounted for in published returns should be taken into account to fully understand the potential risks involved.

Copy trading terms

Let’s take a moment to refresh our understanding of the FX market, which stands as the largest global market in terms of trading volume.

Diversification is a valuable aspect of copy trading as it enables the inclusion of various trading strategies and assets to mitigate trading risks in different market conditions.

An investor in the context of copy trading refers to an individual who follows and utilizes the information or directly replicates trades from other traders.

Slippage refers to the difference, measured in pips, between the intended order price and the actual execution price of a trade. Market volatility or a slow internet connection can cause the order price to change before it reaches the broker for transaction.

Technical Analysis
Technical analysis involves the use of charts to interpret historical price action and patterns, providing insights for future price direction.

Drawdown refers to the decline in equity within a trader’s account, typically from a peak to a trough. It can be expressed in absolute terms or as a percentage.

Mirror Trading
Mirror trading allows you to replicate a trader’s actual strategies, executing the same trades as the trader being copied.

Social Trading
Social trading enables the replication of transactions made by one or more investors within a trading network, providing the opportunity to copy their trades.

Equity Line
An equity line refers to a graphical representation of the account balance of a signal provider, showcasing the growth or decline over time.

Money Management
Money management is a crucial aspect of trading that involves controlling risk. It entails determining how much capital to allocate to each provider or strategy to optimize success and mitigate potential losses.

Stop Levels
Stop levels are predetermined price points chosen by a trader to close out a live trade in order to limit losses if the market moves unfavorably. The placement of stop loss levels depends on the specific trading strategy being employed.

Fundamental Analysis
Fundamental analysis involves understanding and analyzing various factors, such as economic and political news, to forecast future price movements in the market.

Signal Provider
A signal provider is a trader who identifies and generates trading signals that can be followed or copied by investors or followers.

In the forex market, currency ticker symbols are used to represent the currency pairs being traded. Currencies are never bought or sold in isolation but always in relation to another currency, such as the dollar, which is denoted by specific symbol pairs.

Copy trading in 5 easy steps

Select a Strategy Manager

Make a deposit 

Automatically  copy the strategy

Cash in when they profit

Share earning percentage with the Strategy Manager

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