How I Use Copy Trading Services: My Results and Recommendations for Everyone - foulegold/media GitHub Wiki

I've been using copy trading services since 2012 to earn money. While these services are often marketed as a beginner-friendly way to profit, they are actually more suitable for experienced traders. Success depends not only on choosing the right traders to follow but also on configuring the copy trading settings appropriately. The challenge lies in the fact that there are no universal settings since each platform offers its own terms and features.

How Much Do I Pay for Copy Trading Services?

In my experience, there are three main payment methods for copy trading services:

  1. Conditionally Free Copy Trading:

    In this case, the trader you follow is compensated by the platform itself. These costs are embedded into the spread, which is inflated for both me and the trader I copy. For instance, the cost of opening a 1-lot trade is usually increased by $3–$5. Despite this, many traders perceive this method as "free."

  2. Fixed Fees for Copying Trades:

    Here, I pay a separate commission for each copied trade. The commission depends on the trade volume and typically ranges from $2 to $8 per lot.

  3. Percentage of Profit Sharing:

    This commission can go up to 50% but usually falls between 10% and 20%. It is charged daily, weekly, or monthly.

These fees are transparently displayed before you start copying trades.

When the commission is included in the spread, it is often the most advantageous option because my results will closely mirror those of the trader I'm copying—provided I configure the correct copy ratio, which I’ll discuss further.

Copy Trading Settings I Use

Each trader listed on a copy trading platform has a specific account balance. To maintain the same risk level as the trader, I copy trades proportionally to my deposit.

Some platforms offer an automated "copy ratio" that adjusts based on my balance. For instance, if the copy ratio is set to 2, my deposit will be twice the size of the trader's deposit.

By manually lowering this ratio, I can reduce both risks and returns. For example, if a trader opens a 2-lot trade on a $10,000 deposit, my account with $2,000 will open the same trade at 0.4 lots. While this is logical, it raises the question: if you know better than the trader about risks and lot sizes, why use a copy trading service at all?

Other settings some platforms offer include:

  • Setting stop-loss limits for deposits or individual trades,
  • Copying only selected trades from a trader,
  • Limiting the minimum and maximum size of copied trades.

However, these settings often create an illusion of control and improvement. In my case, they have consistently worsened my results.

I also prefer to copy only new trades rather than all open trades. Copying open trades often results in my performance differing significantly from the original trader's.

My Results from Copy Trading

I generally choose conservative traders who avoid excessive leverage. Returns from copy trading rarely exceed 20% annually. For instance:

  • Over seven months of public copy trading, I achieved a 13.35% profit.
  • In private copy trading, my maximum annual profit reached 38.94%.

It's important to note that I don't treat copy trading as a passive income method. I regularly switch the traders I follow, as every trader experiences both losing streaks and periods of high profitability.

My Recommendations for Copy Trading

Different platforms may offer various options for copying trades, such as full volume, fixed volume, or a percentage of the trader's volume. These methods can be risky, as they may lead to complete loss of your deposit, even if the trader you're copying only faces a drawdown.

I recommend sticking to two main features:

  1. Copy Ratio:

    This ensures trades are copied proportionally to your deposit.

  2. Pause Copying:

    This allows you to stop copying new trades while letting open trades close naturally.

Avoid manually closing copied trades, as you won’t know the original rationale or strategy behind them.

For trader selection, I recommend choosing those who focus on stocks, indices, or commodities while avoiding leverage. These traders generally have lower risks.

Source: Brokers.Best