Copy trading is exactly what it sounds like. This approach to trading allows a trader to copy when positions are opened and copy how they are managed. At DayTradeSafe we teach how to open, manage, and close rules-based trades. When you use the copy trading approach you will want to ensure that whomever you are copying is applying the same high, time-tested standards to their trades. Copy trading is a matter of investing in people much like when a long term investor gives their portfolio over to a money manager in hope of better results. In this regard, one should remember that over the last decade or more an ETF that tracks the S&P 500 has generally outperformed the majority of money managers!

How Does Copy Trading Work?

It is common in the world or day trading to copy the strategies and tactics of those who have a track record of success. The difference with copy trading is that in its purest form you give over all trading decisions to someone else. Opening and closing positions, setting stop loss and take profit orders as these actions take place in another account are automatically executed in your account. Generally, a trader has the capacity to override the setup, disconnect from active trades, and manage a trade themselves. The copied traders are called leaders or signal providers and receive a flat monthly fee no matter how well or how poorly their trades perform.

Copy Trading Strategy

If you use copy trading in its pure form you can watch as the signal provider executes their strategies. This may be all that a trader does. Alternatively, one can pick and choose when using this approach. If the signal provider routinely does better at the open, at the close, or during volatile markets, that may be the time to connect to the copy trading system and follow their trades in lock step. To the extent that a trader believes that they can do better or is concerned about losses by the signal provider in this system they can pick and choose when to take over trading themselves.

Copy Trading Signals

A copy trading system is set up to run automatically unlike when you subscribe to alerts via text message, emails, or WhatsApp. Your trading terminal is connected in real time to the server used for signals from the leader to whom you have subscribed. Your terminal receives signals directly from the provider system and executes them immediately so that trades that require rapid and precise timing can be as successful as when they are executed by the signal provider.

Copy Trading Scams

Yes, there are scammers who will take your money and not provide the level of trading expertise and success they promise in copy trading. Two thousand years ago the Romans said, “let the buyer beware.” This holds true today. Do not pay for a copy trading system without asking for references and proof of a track record of success. Do not fall for a compelling “story.” And, when you do sign up, limit your trade amounts to what you can afford to lose until it is clear that the system is on the up and up and generating income for you. Also, only go with a system that you can turn off and on so that you do not follow the signal provider into the abyss on a terrible day.

Copy Trading Futures

At DayTradeSafe we commonly recommend day trading futures as opposed to stocks. Practical reasons include the better tax treatment of profit and loss in futures. Copy trading futures is possible as well. We strongly recommend that if you go this route that you take the time and put the effort into learning how to day trade yourself. At DayTradeSafe you will learn the basics as well as advanced trading skills. You will leave our program as a benchmarked professional trader. At that point you can take advantage of someone else’s skillset if you choose but you will never have to!

Copy Trading System

In a copy trading system you do not receive tips on how to trade but rather a portion of your trading account is linked directly to that of the signal provider. Thus trades made by the signal provider are simultaneously made in your account as well. For this to work your terminal is constantly connected to the service of the copy trading system. The copy trading system should allow you to break this connection at any time in which case you will be able to manage exiting trades.

Copy Trading Brokers

There are many copy trading brokers to choose from if you wish to try this approach. You can look online and find any number of them. However, before signing up you will want to see proof of results and not just a good “story.” You will want references. And you will want to limit the portion of your trading account that is lined to the broker until you are satisfied that they are providing more profit than you could generate with comparable time and effort.