What is Copy Trading?
The biggest advantage of copy trading is that it allows beginner traders to profit from the sophisticated trading strategies used by professional traders. The downside is that beginner traders may end up following risky trading strategies without fully understanding the consequences.
Most Forex brokers now offer some form of copy trading function, but there are major differences between the products they offer and how they integrate into trading platforms.
The best copy trading and social trading brokers will offer a clear explanation of how the copy trading platform works with detailed metrics on each trader offering their services. These metrics should include the return as a percentage over time (days, weeks, months, years), largest drawdown (peak to trough decline), average daily profit, the total time the trader has been active and a risk rating.
How does Copy Trading Work?
Copy trading requires two traders and a Forex broker, which provides the platform for them to co-operate. One trader is the provider, or manager, and they will make their trading strategies available for others to follow. The other trader, or investor, selects the provider they wish to follow – usually for a fee or a cut of the investor’s profits. The broker provides the social platform for the provider and the investor to meet and co-operate, brokers also provide the trading platform that the provider will use to trade.
Most copy trading platforms will also display the manager’s investment return, risk profile, length of experience and trading style. It is essential to also examine the manager’s largest drawdown, this the largest single peak to trough decline in the manager’s trading account. If you are thinking of investing a smaller amount than the manager’s largest drawdown you are putting yourself at serious risk of losing all your capital. Controls for investors are also a key feature, allowing you to choose how much money to invest with a provider and which strategies to follow.
Copy Trading on Major Platforms
MT4, MT5 and cTrader all have built-in copy trading functionality. This means that traders with a preference for these specific trading platforms will find a copy trading community.
Best MT4 Brokers with Copy Trading Accounts
These are the MT4 brokers with copy trading accounts that we have reviewed, ordered by overall score.
Best MT5 Brokers with Copy Trading Accounts
These are the MT5 brokers with copy trading accounts that we have reviewed, ordered by overall score.
Best cTrader Brokers with Copy Trading Accounts
These are the cTrader brokers with copy trading accounts that we have reviewed, ordered by overall score.
Is copy trading legal?
Yes, copy trading is legal in almost all jurisdictions. Prior to the explosion in social trading, copy trading was only available via a managed account. Managed accounts required a power of attorney and a large account balance, and so are unpopular amongst typical retail traders. Copy trading, or social trading, on the other hand is considered self-directed by most regulators, as traders who use this function always select the trading system to copy.
A brief history of Copy Trading
Prior to the merging of Forex trading and social media, the only form of copy trading available was managed account trading. While managed accounts are still an integral part of institutional trading, on a retail level they have been almost completely eclipsed by the rapid rise of copy trading.
Also called mirror trading, auto trading and social trading, copy trading began in the late 2000s with the advent of the eToro and ZuluTrade platforms. eToro has since become one of the most successful Forex brokers in the world, purely based on the strength of their social trading platform, while ZuluTrade is one of the most popular copy trading platforms in the Forex community.
The success of these early pioneers means that most major brokers now offer some form of copy trading or social trading, either through their own platforms or via a third-party, such as ZuluTrade, Mirror Trader or Myfxbook.
Which broker is the best for Copy Trading?
eToro, FXTM and AvaTrade are the best brokers for copy trading.
eToro’s unique social trading platform allows for users to copy each other’s trades and share trading tips. Easy-to-use and web-based, the eToro platform has won many awards over the years for innovation and simplicity. With over 6 million clients, eToro has successfully made social trading an integral part of Forex industry.
FXTM run the FXTM Invest platform, which connects investors with Strategy Managers. Strategy Managers are graded on several metrics and investors can filter Strategy Managers to find the right combination of return and risk they feel comfortable with. Investors only pay a fee on successful trades.
Avatrade offers multiple direct and indirect copy trading options. AvaTrade has also partnered with the Mirror Trader and ZuluTrade platforms to offer a wide range of copy trading functionality. Mirror Trader allows investors to switch between manual copy trading, semi-automatic trading, or automatic trading when following a provider. ZuluTrade is a community of providers, who have been ranked using various practical parameters including maximum drawdown and average profitability.
How do I choose the best copy trading system?
The best copy trading system will not always be the most profitable. It is important to look at a provider’s long-term strategy and risk management to make sure these align with your account balance and goals. Aggressive strategies may make money in the short-term – and may even be successful for those with larger account balances over the long term – but can lead to account wipeouts for those with smaller balances.
Like with all Forex trading, it is important to do your own research and manage your risk appropriately.
Final Word
While a relatively recent method of Forex trading, copy trading has fast become one of the largest. The advantages are obvious for beginner traders, and many experienced traders also swear by it. But, like all Forex trading, it must be entered into with education, caution and a thought for risk management.
Forex Risk Disclaimer
Trading Forex and CFDs is not suitable for all investors as it carries a high degree of risk to your capital: 75-90% of retail investors lose money trading these products. Forex and CFD transactions involve high risk due to the following factors: Leverage, market volatility, slippage arising from a lack of liquidity, inadequate trading knowledge or experience, and a lack of regulatory protection. Traders should not deposit any money that is not considered disposable income. Regardless of how much research you have done or how confident you are in your trade, there is always a substantial risk of loss. (Learn more about these risks from the UK’s regulator, the FCA, or the Australian regulator, ASIC).
Our Rating & Review Methodology
Our State of the Market Report and Directory of CFD Brokers to Avoid are the result of extensive research on over 180 Forex brokers. These resources help traders find the best Forex brokers – and steer them away from the worst ones. These resources have been compiled using over 200 data points on each broker and over 3000 hours of research. Our team conducts all research independently: Testing brokers, gathering information from broker representatives and sifting through legal documents. Learn more about how we rank brokers.
Editorial Team
Chris Cammack
Head of Content
Chris joined the company in 2019 after ten years experience in research, editorial and design for political and financial publications. His background has given him a deep knowledge of international financial markets and the geopolitics that affects them. Chris has a keen eye for editing and a voracious appetite for financial and political current affairs. He ensures that our content across all sites meets the standards of quality and transparency that our readers expect.
Alison Heyerdahl
Senior Financial Writer
Alison joined the team as a writer in 2021. She has a medical degree with a focus on physiotherapy and a bachelor’s in psychology. However, her interest in forex trading and her love for writing led her to switch careers, and she now has over eight years experience in research and content development. She has tested and reviewed 100+ brokers and has a great understanding of the Forex trading world.
Ida Hermansen
Financial Writer
Ida joined our team as a financial writer in 2023. She has a degree in Digital Marketing and a background in content writing and SEO. In addition to her marketing and writing skills, Ida also has an interest in cryptocurrencies and blockchain networks. Her interest in crypto trading led to a wider fascination with Forex technical analysis and price movement. She continues to develop her skills and knowledge in Forex trading and keeps a close eye on which Forex brokers offer the best trading environments for new traders.