How Does Copy Trading Work?

Written by Miro Nikolov

Miro Nikolov

Miro Nikolov is the co-founder of TradingPedia.com and BestBrokers.com. His mission is to help people make profitable investments by giving them access to educational resources and analytics tools.

, | Updated: September 15, 2025

Unlike social trading, copy trading is not as reliant on the information provided by other traders as it is on their actions. In other words, copy trading allows you to replicate the actions taken by other traders. For the process to be considered copy trading rather than social trading, you must copy a trader via the automatic system provided by the platform you are using.

Copy trading mechanics

Copy trading connects a portion of your portfolio with the portfolio of a trader of your choice. Once you copy a trader, all of their open trades are copied to your account. Furthermore, all of their future actions are automatically copied to your account as well. You are prompted to choose an amount to invest in a certain trader. In most cases the amount cannot be more than 20% of your portfolio. The sums used in the trades are calculated as a percentage of the trader’s portfolio based on how much you decide to invest. Imagine your account’s balance is currently $1,000. You do not have any open trades but you have decided that you want to copy a trader. His stats look promising but, since this is your first time trying something like this, you do not want to invest too much. That is why you invest $100 (or 10% of your funds). The trader has one open trade, which is copied to your account.

The sum of $100 you have invested is a percentage of the trader’s portfolio. If his portfolio is $1,000 (and let’s say it is; it’s easier to calculate), then your investment is 10% of his portfolio. If he makes a trade for $100, then you will make the same trade, but the money invested from your account will be 10% of the money he’s invested, or in other words $10 if he’s invested $100. The mechanics are automated, so do not worry about the calculations – you will not have to even lift a finger because the system does everything automatically.

Note: Some sites use an automated system where a certain percentage of your portfolio is invested. Check the site’s policy before you begin trading with real money.

Adding and removing funds

If you like how the trader is handling your investment, you can seamlessly increase the funds. This way you will invest more when a trade is copied to your account, which increases your profits if the trade is successful. However, this also increases the risks because, in case it’s a losing trade, your losses will also be bigger. It is a good idea to keep your portfolio diversified and not invest too much in a single trader. You can still increase or reduce the investment based on the trader’s performance. If you’re especially satisfied with the results, you can try to increase your profits by investing more. You should always keep in mind that investing more is a risky move, though.

Note: Some platforms allow more control than others. Some sites use a fixed system. You will have to check with the provider. We will talk more about this in future sections.

Individual trades

Once you begin copying a trader, you can have different levels of control depending on the platform you have chosen. Some sites use a fixed system, which means that once you begin following a trader, the only course of action you can generally take is to stop copying them. On the other hand, there are also more liberal platforms that allow you to control your funds manually.

For example, if there is a trade you do not like or you think that if it remains open for longer you will end up losing from it (or lose more), then you can manually close it. Once again, we will talk more about the different platforms in future sections of the guide.

Why is copy trading beneficial?

Trading in general can be intimidating. It’s not easy to begin with, and once you throw charts and patterns into the mix, it becomes confusing enough to throw even the most enthusiastic newbie trader into panic mode. Copy trading helps you get rid of that fear. It allows you to begin trading without knowing anything about trading. This way you can see what experienced and successful traders do and you can figure out why. If they are more talkative, they can even directly show you and give you a few tips. This is a mutually beneficial relationship.

Also, smart is he who learns from his own mistakes, but wise is he who learns from the mistakes of others. Sure, you might not have taken a trade in your life. But that won’t stop you from seeing what works and what doesn’t based on the successes and failures of others. In time you will learn to see everything you need in order to become a trader yourself. All you need is time.

Final words

Copy trading is the perfect start for a newbie trader. It allows you to experience the successes and failures of others and learn directly from their mistakes. It’s a nice way to begin making money on the market, but it’s not without risk.

You should be really careful in your choice of platform, depending on how much control you want to have over the operations. You should also be careful which trader you choose – at the end of the day, you are entrusting a part of your portfolio to a total stranger.