What is copy trading?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
Copy trading mirrors another user's trades in your own account, and some exchanges offer it as a built-in feature. What gets copied is the orders — not the other person's capital, time horizon or tolerance for loss. You are handing your money to someone else's judgement while remaining the only one who can stop it.
Key points
- Mirrors another user's orders into your account
- Copies the trades, not their capital or risk tolerance
- Displayed past performance says nothing about the future
- Only you can decide to stop it when losses come
Definition
A feature offered by some exchanges and tools that automatically reproduces a chosen user's orders in your own account, with an amount you allocate to the strategy.
Mechanically, you pick a trader, allocate an amount, and every order they place is executed proportionally in your account. Exchanges display leaderboards of performance and follower counts, and the trader typically earns a share of fees in return.
What is not copied matters most. You cannot see what share of their net worth the position represents, how long they intend to hold, or how much loss they will accept. The same order means different things at different capital sizes: a few per cent of their assets may be most of yours.
Read the performance display carefully. A short track record may just reflect a market that suited one style. Without a maximum drawdown figure alongside it, you cannot tell how much unrealised loss produced that return. Before you start following anyone, decide the loss level at which you will stop.
Watch out for
- · Headline returns depend on the window chosen — read them with the drawdown
- · If the trader uses leverage, your losses are leveraged too
- · Automation does not move the loss, or the tax filing, off you