What is Copy Trading?

Copy trading, also referred to as mirror trading, is quite literally what it sounds like - copying other traders. However, it's not anything illegal, it functions as a mechanism where less experienced or time-constrained investors can replicate the trading decisions and investment strategies of more knowledgeable and successful traders.

How does it work? Firstly, you have to find a platform that allows participating in copy trading, like eToro, for example. Then, you have to select an experienced trader or a particular investment strategy they find promising, and set the amount of capital you're willing to invest.

When using eToro's CopyTrader tool (or another similar platform), there's not much else you'll have to do, as all actions of your chosen trader will be mirrored automatically in your trading account based on your capital.

Overall, the appeal of copy trading lies in its potential to democratize investing. Those with limited knowledge of the financial markets or insufficient time to actively manage their portfolios can tap into the expertise of more seasoned investors. They can benefit from the successful strategies and decisions made by others, potentially realizing profits without requiring in-depth financial expertise.

However, it's important to note that copy trading isn't without its risks. While the potential for gains is real, so is the possibility of losses. When a trader's actions are copied, the outcomes, both positive and negative, are replicated proportionally.

Therefore, while it can be a valuable tool for learning and passive investing, it's essential for participants to carefully choose the traders or strategies they follow and to monitor their investments closely.

eToro is a multi-asset platform that offers both investing in stocks and crypto assets, 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. 77% 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. The presented trading history is less than 5 complete years and may not suffice as basis for investment decisions.

Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

eToro USA LLC does not offer CFDs and makes no representation, and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity-specific information about eToro.