Pros and Cons of Copy Trading

logomark Anthony Gallagher calendar Last Updated: November 2021 timer 6 min read
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Copy Trading is rapidly gaining a good share of the online trading field, being implemented with various facets in ever more platforms.

But surely, many investors and professional traders have a question that seeks an answer: “What are the advantages and benefits of Copy Trading?”.

Let’s see what are the most important benefits of this “new” type of investment.

Discover top copy trading platforms

Table of contents

What Is Copy Trading Exactly?

Before we even begin explaining what may be the benefits of copy trading, we should probably give an overview of this type of social trading.

As the name suggests, copy trading consists of an automated trading method in which an investor or trader replicates the signals, or operations, of more or less professional traders (as we shall see later) on dedicated platforms, such as ZuluTrade or eToro (want to advantages and disadvantages, then check our pros and cons of eToro).

Benefits of Copy Trading for Everyone

So, let’s tackle the doubt that is troubling many people who, despite being interested, may be afraid to leap to this new trading technology.

What are the benefits of copy trading?

This type of trading certainly offers several advantages, both for investors who would prefer to watch from the sidelines, and for the more or less experienced traders.

Let’s see which are the most important ones.

Investing with Limited Market Knowledge

The chance to start investing in the markets while having limited knowledge is certainly one of the most inviting benefits of copy trading, but it needs clarification.

Undoubtedly, the users and possible investors who have not studied the markets in depth may not feel able to test first-hand the challenges they offer. With this in mind, copy trading offers a huge possibility, as we can follow experienced traders with the know-how of the job, trying to replicate their “luck”.

However, no conscientious investor should think that just registering to a copy trading platform and following those 3-4 traders at the top of the rankings will make them rich, simply because no investment works this way.

What can be done, however (which we highly recommend), is to perform a thorough research with professional criteria, to find the trader with the strategies that best fit the type of investment we are looking for (more or less risk, volumes, profit percentages over time).

Becoming an expert in this kind of research certainly does not require the time it takes to become experts in technical and fundamental analysis of financial markets, and to actually start trading first-hand.

Therefore, we can find some traders we trust and use their experience for our gain.

Save Time

This is another of the main benefits of copy trading.

In the most classic form of investment through copy trading, users who invest do not work as traders, while Signal Providers, i.e. who creates the signals to be replicated for the various followers, are in fact traders.

This means that once we have created our people-based portfolio (another key concept of copy trading), making sure we have chosen professional traders (unfortunately, copy trading platforms are full of less serious traders), we won’t have to constantly look at the graphs, anxious for our funds’ fates.

With Copy Trading, investors can concentrate primarily on their work, because the Signal Providers, who trade for a living, will invest for us.

Of course, this doesn’t mean we will never check the platform, but we will certainly lose a lot less time than we would if we were the ones actually in command.

Learn from the Best

Going back to what is probably the most important of the benefits of copy trading, this is certainly an advantage that applies to both traders and investors, whether they are newbies or veterans.

Given the nature of copy trading, we can’t underestimate the educational experience that can derive from it, if taken with the right approach.

By observing a professional trader at work, we are offered the opportunity to learn how to recognize the best moments to open operations on divers assets. This is obviously positive, as it allows less experienced followers and traders to learn outside the scope of demo accounts, being able to see first-hand how the strategies of professionals work.

Furthermore, all of this can be done in an environment that is not necessarily “educational” and isolated, an environment in which it is possible to reap profits without the risks connected to our inexperience.

Customizable Trades According to the Needs of Investors

A problem which is mainly associated with Mirror Trading, similar to Copy Trading in dynamics but much less customizable, is precisely the impossibility of adapting the feed of copied operations to the investment portfolio.

Most of the best Copy Trading platforms, like eToro and ZuluTrade, on the other hand, allow their users an incredible level of customization. For instance, we can operate as a percentage of the lots and size of the trades carried out by our Signal Providers.

This opportunity is rarely considered when it comes to Copy Trading, but in fact it allows users to start investing even if a little dubious. All it takes is just decreasing the ratio of operations against those carried out by our trader portfolio and the risk of losing our investment will decrease drastically.

The customization offered by copy trading platforms can also be very useful should we want to test some less experienced Signal Provider, or one that uses more risky strategies and, in general, it allows for a greater diversification of our investments.

Diversification of Investments

Copy trading fares well also as regards diversifying investments. Not only can we diversify by deciding to copy the signals of different traders, we can also choose traders with very different characteristics.

We can combine traders who work with medium-long term operations with traders who prefer intraday trading; or, traders working exclusively on forex with traders specialized in shares, or why not, even cryptocurrencies.

An Additional Source of Income for Signal Providers

This last benefit of copy trading is particularly aimed at traders, and it’s certainly the most pragmatic.

Traders who operate on copy trading platforms are paid for investors who replicate their signals or if they actually return profits from them.

So, if you are a trader who already works in the field, why not switch to a technology that allows you to earn more if you work well enough to attract followers for your operations?

Altogether, these are the 6 main benefits of copy trading, but obviously there are many others. I suggest you take a look at our reviews to understand what they may be.

Copy Trading Benefits FAQs

Is it profitable to copy trade?

Copy trading profitability depends on the success of the traders you decide to copy, as well as timing in the market. Copy trading still carries risk.

Is copy trading good for beginners?

Copy trading is easier to pick up than trading yourself. As a trader, you should still learn the basics of investing and how to create a portfolio above all.


eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, 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. 68% 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.

Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.

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.

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74-89% of retail CFD accounts lose money

About the Author

Anthony Gallagher

Broker Expert

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world.

A trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

He is a keen golfer with a very high handicap so when not helping you find the best broker for your needs, you may find him on the course or just as likely following any number of sports from the comfort of his sofa.

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