Overview
Copy Trading offers a way to benefit from the expertise of experienced traders, but it carries risk like all trading activity. This article explains the key risks and best practices to help you make informed decisions.
Read this article before subscribing to any Provider.
Step-by-step instructions
Follow the steps below to complete this process:
Key risks to understand
- Past performance is not necessarily indicative of future results — a Provider who has performed well historically may not perform well in the future.
- Provider strategies can change without notice.
- Market conditions change — a strategy that worked in one environment may fail in another.
- Maximum drawdown shows historical losses, but future drawdowns can be larger.
- Your account could lose money, potentially the full amount allocated to Copy Trading.
Best practices for Followers
- Review each Provider's strategy description, maximum drawdown, and absolute gain before subscribing.
- Understand the offer terms — including any commercial terms — before you subscribe.
- Only allocate funds you can afford to lose to Copy Trading.
- Consider starting with a smaller allocation to test whether the Provider's style suits you.
- Diversify — consider following multiple Providers with different strategies rather than concentrating in one.
- Monitor your subscriptions regularly through My Portfolio.
- Be prepared to unsubscribe if a Provider's style or performance no longer suits your goals.
Understanding key metrics
- Max Drawdown — the largest peak-to-trough decline historically. A 40% max drawdown means the account was at some point 40% below its previous high. Higher drawdown means higher historical risk.
- Absolute Gain — the overall percentage return since the Provider started tracking. Higher gain often comes with higher drawdown.
- Consider both metrics together, not in isolation.
For Providers — responsibility
- Trade responsibly — your trades directly affect Followers' accounts.
- Communicate significant strategy changes if possible.
- Understand that your performance is publicly visible and shapes Follower confidence.
Troubleshooting
If you run into issues, the most common causes and fixes are listed below.
You're not sure whether a Provider matches your risk tolerance
- Look at both Absolute Gain and Max Drawdown together. A Provider with a very high gain but also very high drawdown is a high-risk choice. If you can't tolerate the historical drawdown, that Provider isn't right for you.
The Provider you were following stopped performing well
- You can unsubscribe at any time. See the disconnection article for how to unsubscribe. It's often better to unsubscribe early than to hope performance recovers.
Frequently asked questions
Q: Does past performance guarantee future results?
A: No. Past performance is not necessarily indicative of future results.
Q: What is Max Drawdown?
A: Max Drawdown is the largest peak-to-trough decline in the Provider's account historically. A 40% max drawdown means the account was at some point 40% below its previous high.
Q: Should I put all my funds into Copy Trading?
A: This is a personal decision, but many clients choose to allocate only a portion of their trading capital to Copy Trading. Never allocate more than you can afford to lose.
Q: How do I choose a Provider that fits my risk tolerance?
A: Review each Provider's maximum drawdown, absolute gain, trading style, and offer terms. If unsure, start with a smaller allocation and monitor performance before committing more.
Related articles
- What is Copy Trading and how it works
- How to become a Follower
- How to disconnect from a Provider