Copy trading is a new, exciting way to get involved in the trading world. It is exactly what it sounds like—traders copy trades executed by other investors.

In its essence, copy trading is a portfolio management strategy used by traders who wish to emulate another more successful trader.

Social Trading

Social trading is the buying and selling of financial instruments copying the exact same trades of a more experienced trader. Lesser experienced traders and investors sometimes prefer to have somebody with more experience do the “heavy lifting” of fundamental and technical analysis, allowing replication of their work.

The idea of allowing others to profit from copying the transactions of a profitable trader has been around for about 15 years. The industry has grown around the idea now allowing trading and investing across all asset classes.

Brokers offering social trading have been praised for breaking down barriers to entry into the exciting world of finance. Though there have been many complaints about the prevalence of unrealistic expectations. This is due to new traders jumping in too quickly without enough knowledge of how to negotiate the financial markets.

Social trading does have a major time commitment. Even so, it is still suitable for outright beginners looking to learn the basics of the world of trading and investing.

Copy Trading

Copy trading was born from social trading. It is all about following specific traders trade-for-trade. It can be thought of as a form of investing for traders who like the idea of financial speculation but don’t feel they have the time, or talent, to become successful working alone.

Social trading is all about helping those trying to learn to skip some of the steps. Copy trading is copying another trader’s decisions exactly .

On the eToro platform, novice traders can follow their more experienced peers as they fully document their transactions. One of the benefits of this system is the high level of transparency. There is no hiding any part of a trader’s record. Everything is on display for all to see. 

Advantages of Copy Trading

• Copy trading frees up times for new and inexperienced traders and investors. There is no need to commit to spending hours every day monitoring the markets.
• Copy trading allows traders to follow another trader who mirrors their trading philosophy and tolerance for risk.
• New traders can begin to profit from the financial markets right away. The need for a period of building up knowledge is bypassed as an experienced trader takes the lead.
• The option to choose between automated trading or manual. Traders can sit back and watch the experienced trader do all of the work, or switch off the autopilot and get stuck in themselves. 

eToro is much more than a trading platform to its members.

“You’ll be joining a leading collaborative community of traders and investors — a place to connect, share, and learn.”

Ultimately, copy trading is an incredible learning tool for anybody interested in the financial markets. It isn’t a magic wand or a get rich quick scheme. It is a revolutionary way to learn about the different financial instruments, hopefully setting a trader up to take control of their own investments in the future.

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs. Please note that 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.

Past performance is not an indication of future results. Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.