Τι είναι το Copy Trading; Πώς να επενδύσετε σε ένα χαρτοφυλάκιο Copy Trading

If you are a novice investor who simply has no idea how the stock arena works, you may be considering an ETF or mutual fund. This is because the respective provider will buy and sell stocks on your behalf. However, a somewhat new phenomenon has recently entered the space that you may find appealing – copy trading.

In short, copy trading allows you to “copy” the trades of other investors on the stock trading platform you use. Therefore, you have the possibility of making money on the stock markets without having to research which companies to invest in. Instead, the entire process is passive.

In this guide, we explain the details of copy trading, how it works, and whether it is suitable for your long-term investment goals.

How does Copy Trading work?

As with most online investment streams these days, the process of copying trades is actually relatively simple:

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

What is Copy Trading?

In its most basic form, “copy trading” does exactly what it says. That is, you will copy the trades of another investor. This then allows you to actively trade in the stock markets without having to have any knowledge of how things work.

It also means that you will benefit from the expertise of the respective copy trader, as they will make every decision on your behalf. Best of all, the copy trader will be investing with their own capital – so effectively, this reduces the threat of recklessness.

It is important to note that the copy trading feature is usually offered by a select number of specialized brokers. For example, it is widely accepted that the SEC-regulated platform eToro is the market leader in this particular segment.

However, there are a few other brokers that are also leading the way in copy trading, such as AvaSocial and its partnership with SEC-regulated Pelican Trading and Libertex with its MetaTrader 4 offering.

Top 3 copy trading platforms

When it comes to copying trades from other investors, you want to make sure you have a top broker that helps you find the best ones! The level of performance analysis provided is essential for making the right decision on who to copy.

You also want to make sure that the copy trading platform is simple to use and the fees are transparent. To save time, here are the top three copy trading platforms to get started with:

1. eToro – Best copy trading platform
2. AvaSocial – Regulated trading copy application by the Capital Market Commission
3. Libertex – Access to MetaTrader 4 signals

We discuss each of these in detail below.

1. eToro – Best copy trading platform

eToro is THE leader in copy trading services. After all, their copy trading platform has over 20 million users, so there should be some decent people to copy from. The platform itself is super easy to use and web-based, so no downloads are required!

The level of analytical detail is truly impressive. You can see detailed statistics of all copy traders and analyze their historical performance, total profits and losses, and most importantly – comments from other people who copy them.

Past performance is not an indication of future results.

Deposits are also free (conversion fees apply) and you can access copy trading services across multiple asset classes, including currencies, cryptocurrencies (CFDs), stocks, commodities and more. If you’re serious about copy trading, eToro is THE place to be.

Advantages:

Disadvantages:

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

2. AvaSocial – Securities and Exchange Commission-regulated copy trading app

The AvaSocial copy trading app is a collaboration between global regulated broker AvaTrade and Securities and Exchange Commission-regulated Pelican Trading. Together, they provide a copy trading app that is available on Android and iOS devices.

Through the app you can interact, follow and copy other traders with the click of a button. The performance statistics are very good, helping you find the right trader to copy. It details monthly performance, trading activity, total profit and markets traded.

Advantages:

Disadvantages:

71% of retail investors lose money trading CFDs on this site.

3. Libertex – Access to MetaTrader signals

Libertex provides users with access to MetaTrader Signals offered through the MetaTrader 4 trading platform. From the platform, users can view the performance of other investors and decide to copy them – although to copy most providers there is a fee to do so, unlike eToro.

The platform is not as user-friendly as eToro or AvaSocial, but it does allow for algorithmic trading. Fortunately, there is good quality performance data for investors to review and analyze before choosing who to copy.

Advantages:

Disadvantages:

83% of retail investors lose money trading CFDs on this site.

How does Copy Trading work?

As with most online investment streams these days, the process of copying trades is actually relatively simple.

Below we have outlined the general process you should follow – along with some handy screenshots from the leading copy trading platform eToro. However, the process remains largely the same regardless of which platform you decide to use.

Step 1: Choose a Copy Trader

The first, and perhaps most important part of the copy trading process is choosing a trader to “back”. That is, you should carefully choose an experienced trader that you want to copy in full. After all, your profits and losses will be dictated 100% by the trader’s trading results.

Copy trading eToro

If you were to use eToro to get into copy trading, you would essentially have access to over 12 million investors. It goes without saying that the vast majority of these investors will not have the skill set nor proven track record worth copying. As a result, it is imperative that you take full advantage of the filter facilities.

Past performance is not an indication of future results.

You can use a variety of filters, such as location, the market you want to copy trades from, the amount the copy trader has earned in the last twelve months, and more. Once you adjust the filters and hit “GO!”, an extensive list of potential copy traders to copy will appear!

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

Copy AvaSocial trades

AvaTrade has a unique copy trading offering from its partnership with SEC-regulated Pelican Trading. With the AvaSocial app, you can interact, follow, and copy the trades of other investors who are known as signal providers.

You can view detailed statistics for each of the providers by clicking on their profiles. They will then analyze their historical performance, frequency of trading activity, and the number of followers and copiers they have.

71% of retail investors lose money trading CFDs on this site.

Copy trades Libertex

With Libertex you can access copy trading features through the popular MetaTrader 4 trading platform and the MetaTrader Signals module. This allows you to see the performance of other investors using the MetaTrader platform.

Past performance is not an indication of future results.

The platform is a bit more complicated to use than eToro which is super easy. Also, you may have to pay for some of the signals to copy to your trading account!

83% of retail investors lose money trading CFDs on this site.

Step 2: Analyze CopyTrader performance

This is where things get interesting, mainly because you will have a significant amount of information at your fingertips once you click on a specific investor profile.

For example, you will be able to explore:

Performance

Some would argue that this is the most important metric to analyze. Basically, this gives you a complete breakdown of how the investor has performed on the platform since joining. You need to tread carefully here, especially when it comes to the time frame.

Past performance is not an indication of future results.

For example, while an investor may be 40% in the green, this may only be based on 3 months of trading. This would mean that the investor is taking on significant risk. Instead, it is recommended to follow copy traders who have a track record of at least 12 months.

Copiers and AUM

You can see how many people are currently copying that investor. If an investor has a large following, this is generally a good sign.

Past performance is not an indication of future results.

You can also look at the investor’s AUM (Assets Under Management). This number won’t play a significant role in the selection process, but it’s interesting nonetheless.

Transaction statistics

This particular set of statistics is useful as you can see the mindset of the investor. For example, you get a complete breakdown of the assets the investor prefers to buy and sell. If you want to stick exclusively to stocks, you should evaluate this particular statistic before walking away with your money.

You can also see the average profit and loss of each trade. This number is also useful as it gives you an idea of ​​what the investor is typically aiming for in terms of profits. It also indicates how much the investor is willing to stay in the red before exiting their position.

Average conditions

At the bottom of the investor profile, you can see some interesting averages. For example, you can see how many trades the investor typically makes each week. The higher the number, the more active the investor is. Similarly, if it is a low number, the investor is likely to favor a long-term “buy and hold” strategy.

Additionally, you can also see the average number of days the investor keeps a position open. Once again, this will give you a clearer indication of whether the investor prefers a short-term or long-term strategy.

Risk assessment

eToro will also assign the investor a risk rating, which is updated frequently. The risk meter goes from 1 -10. The lower the number, the less risk the investor is taking on. The level of risk you are comfortable with will ultimately depend on you .

Step 3: Decide how much you want to invest

Once you have chosen a trader you like the look of, you will then need to decide how much you want to invest. There will always be a minimum investment limit, which will vary depending on the platform you have chosen. In the case of eToro, this is at least $200 (around £160) per copy trader portfolio.

Once you confirm the investment – the funds will be taken from the brokerage account balance and allocated to the investor’s portfolio.

Step 4: Copy the entire portfolio

Once you make an investment, your personal stock portfolio will be updated accordingly. To show how this works in the easiest way possible, it’s perhaps best to give you a basic example.

To keep things simple, let’s assume the copy trader has the following portfolio:

• Shares worth £10,000 (20%) in Tesco (20%)
• £20,000 worth of shares in HSBC (40%)
• £20,000 worth of shares in Royal Mail (40%)

While it is clear that the total value of the portfolio is £50,000 – this number is really irrelevant. Instead, for the purposes of copy trading, we are more interested in the “weighting” of the portfolio. In layman’s terms, this means how much each stock contributes to the wider portfolio. This is because your personal stock portfolio will reflect this weighting exactly.

For example:

• Let’s say you decide to invest £2,000 in your copy trading portfolio
• 20% of the portfolio would be in Tesco shares, a total of £400
• 40% of the portfolio would be in HSBC shares, a total of £800
• 40% of the portfolio would be in Royal Mail shares, a total of £800

As you can see from the above, your portfolio now mirrors that of your chosen investor – but at a percentage proportional to what you have invested!

Step 5: Copy ongoing transactions in their entirety

Once your personal stock portfolio mirrors that of the selected Copy Trader, you don’t need to do anything else. However, it is important to remember that the investor will be actively buying and selling stocks as long as they remain on the stock trading platform.

In other words, if the investor decides to sell all of his shares in BP, then the BP shares will also be sold. Similarly, if investors decide to add Facebook shares to their portfolio, your portfolio will also contain Facebook shares.

This is where things get a little confusing, as eToro copy traders often deposit additional money so they can add more stocks to their portfolio. In this case, you have two options:

Add more money

When the investor deposits more money, you will receive a notification. In most cases, the investor will publicly announce that they intend to add more funds, which gives you time to prepare. Either way, if you want to truly mirror the investor in full, you will need to deposit more money – in a proportional amount.

• For example, if the investor initially had a portfolio worth £50,000 and adds £10,000 – then they increase their position by 20%.
• So, if your portfolio is worth £2,000, you will need to add an additional £4,000 (20% of £2,000).

Automatic update

If you choose not to add more money to your copy trading portfolio, then your position will be automatically rebalanced. In other words, eToro will have to sell some of the shares you currently own to make room for the new market. In this sense, you will still mirror the investor, but the weighting will not be 100% accurate.

How do you make money from copying trades?

If you have read our detailed guide to ETFs and mutual funds, then you should already have a clear understanding of how you make money from a copy trading portfolio. If not, you will make money the same way – if you have bought the shares on a DIY basis. Therefore, you can make money in the form of capital gains and dividends.

• Capital Gains: Let’s say you invest £5,000 in a copy trading portfolio containing 25 different stocks. At the end of the first year, the total value of the stocks has increased by 10%. Therefore, the value of the copy trading portfolio is now £5,500. If you exit your position, your capital gains would be £500.
• Dividends: If your copy trading portfolio contains dividend stocks, then you will be entitled to your share. Unlike an ETF or mutual fund, your dividends will be paid as soon as they are distributed by the company. This is great news if you want to use compound interest. As for the amount you will receive, it will be proportional to the amount you have invested in that particular dividend paying share.

Top tip: To mitigate the risk of being overexposed to a single copy trader, it may be worth diversifying across multiple investors. However, you should ensure that you meet a minimum investment of $200 with each copy trader – if you are using eToro.

What Copy Trading fees should I be aware of?

The fees you pay when using the copy trading feature will depend on the platform you choose.

Frequently asked questions