Copy Trading
An Overview Of Copy Trading
What is Copy Trading?
Copy Trading is where in your own broker account is linked to that of another traders account (master account) and trades are replicated in your account. This is a lot easier to setup and manage compared to using a regular trading bot for investment.
Not To Be Confused With A PAMM Account
PAMM accounts (it's a Forex term) are where your funds are pooled into one central account so that smaller investors can participate. However there are some disadvantages to these types of setups which folks should be aware of.
Copy Trading v PAMM - Which One Is Better?
- In a draw down situation (open losing trades), if other investors pull funds the PAMM may have to close some trades at a loss and thus a cascading set of events is possible.
- Limited control over the strategy, no adjustments can be made due to the centralized management.
- Requires active management for deposits & withdraws and there maybe strict rules
Copy Trading Advantages
- Individual broker accounts.
- Full investor control: you can stop trading, take lower risk, set stop losses and withdraw a lot easier with less rules.
- Withdraws do not impact the trading strategy of the master account.
- This model supports a personalized investment strategy.
How Much Does Copy Trading Cost?
There are many different pricing models, some have a large upfront and a monthly fee based on equity or performance. They might be advertised in your social feeds. However, I know of one copy trading service from a veteran trader that charges a reasonable fee based on performance.
Who Does Copy Trading?
There are many firms offering copy trading & PAMMs. I'm sure once you google that term they will find you in your social feeds. Folks in the discord have suffered significant losses with a certain PAMM service that advertises heavily. Do your due diligence on any investment you make and understand how it works before paying the upfront fee.