what is copy trading in forex market

A Comprehensive Guide to Copy Trading in Forex: Everything You Need to Know

Forex copy trading has observed a stream in popularity in recent years, appearing as a powerful method in the forex market. This approach enables investors to replicate the trades made by skilled traders, using their knowledge and expertise to improve their trading pursuits. Similarly, professional traders can generate additional income and establish their reputation within the trading community by allowing others to copy their trades.

In this article on Finestel, we aim to examine the concept of forex copy trading, delve into its functioning, and emphasize its advantages to investors and traders. Additionally, we’ll compare forex copy trading to other markets, considering factors such as asset classes and market volatility. Additionally, we will examine the feasibility of passive income through copy trading and explore the legal and regulatory considerations that participants need to be aware of. Finally, we will explore tips for successful copy trading and provide an overview of the top five forex copy trading platforms.

What Is Forex Copy Trading?

The forex market has witnessed substantial expansion in trading volume and market involvement in recent decades. Statista reports a notable increase in trading volume, with 39 different currencies reaching $1.239 billion in 2001 and escalating to $7,506 billion in 2022.

Consequently, the fear of missing out prompted many individuals to adopt various trading strategies, with copy-trading emerging as one of the most important approaches. Through this practice, investors copy and replicate the signals or orders of professional traders to leverage the advantages provided by this strategy. By adopting this approach, investors gain access to the expertise, strategies, and insights of experienced and successful traders to enhance their trading endeavors.

Additionally, traders can derive additional advantages from copy trading through the creation of collaborative opportunities with fellow traders. Stick around, and you’ll discover more as we delve further into the topic.

How Is It Implemented?

In the Forex market, copy trading is implemented through the use of specialized software developed by third-party companies. These companies create copy trading solutions specifically designed for popular trading platforms like MetaTrader and cTrader. The software is then licensed to forex brokers who integrate it into their trading platforms.

The copy trading software offers a range of features that enhance the copy trading experience. Traders using the software can search and select other traders to copy based on their performance and trading strategies. They can monitor the performance of the copied traders, set risk parameters to manage their exposure, and automatically replicate their trades in real-time.

forex copy trading
The software provides a user-friendly interface within the trading platform, making it easy for traders to engage in copy trading activities. Traders can access the copy trading functionality directly from their trading platform, eliminating the need for separate third-party applications.
The integration of copy trading software into the trading platform allows traders to seamlessly execute copy trades without the need for manual intervention. The software ensures that trade signals are transmitted accurately and promptly, enabling the timely execution of copied trades.

Copy Trading for Experienced Forex Traders

For professional traders, copy trading serves as a supplementary resource to support and enhance their existing trading strategies and activities. First and foremost, experienced traders use copy trading to increase their trading volume and generate higher profits. Then, by building a successful track record and attracting a substantial following, professional traders can generate supplementary income through copy trading. Also, professional traders can validate their performance and establish a reputable presence within the trading community by showcasing their trading skills and track record.

On the other hand, experienced traders may encounter challenges such as regulatory compliance, managing a large number of copiers or trades, and safeguarding their reputation. For instance, experienced traders face the risk of damaging their credibility and follower/investor attraction if they incur losses due to poor trading decisions. Finally, experienced forex traders can derive various benefits from copy trading; nevertheless, they should remain mindful of certain associated risks.

Copy Trading for Beginners in Forex

We outlined copy trading’s applications for experienced traders, yet in practice, beginners utilize it more frequently than experienced traders. Hence, let’s explore the practical implementation and advantages that novice traders can derive from engaging in forex copy trading.

Risks and Rewards

  • Engaging in trades without adequate knowledge can result in financial losses.
  • Novice traders should conduct research to identify trustworthy traders, but they must also recognize that market risks persist.
  • Copy trading offers exposure to the Forex market and the potential for profitability.
  • Copy trading saves time and expedites the learning process.

Copy Trading for Beginners in Forex


  • Novice traders can leverage copy trading as a means to acquire experience in the forex market.
  • Alongside conducting research to identify accomplished traders, it is crucial for beginners to remain updated on market and economic trends.
  • Opt for copying multiple accomplished traders who employ diverse trading strategies and exhibit varying risk profiles.

Differences of Forex Copy Trading Compared to Other Markets

Generally, copy trading is prevalent in the Forex market, while stocks and cryptocurrencies also offer copy trading platforms for replicating trades. The distinction between Forex and other markets is the assets being traded, accompanied by factors like asset class, market volatility, implementation, and trading tools.

In the forex market, there are companies that develop copy trading software specifically designed for popular trading platforms like MetaTrader and cTrader. These companies create copy trading solutions that allow traders to copy the trades of other traders directly within these platforms.

These copy trading software solutions are typically developed by third-party companies and licensed to forex brokers. The brokers then integrate the copy trading functionality into their trading platforms, allowing their clients to access and utilize the copy trading features.

As a participant in the market, it’s important to note that the crypto market offers 24/7 trading availability, while the Forex and stocks markets have periods of closure during weekends. In the Forex market, asset classes include currency pairs such as EUR/USD and GBP/JPY.

When it comes to market volatility and risks, it’s important to understand that the cryptocurrency market is known for its sharp volatility, while the stock market generally exhibits relatively lower volatility compared to the forex and cryptocurrency markets.

Passive Income through Copy Trading: Is It Possible?

If you’re looking to earn passive income through copy trading in forex, there are several factors and risks to consider. Copying successful and experienced traders can be a viable option for investors seeking passive income. However, it’s crucial to conduct thorough research and evaluate the traders’ performance, risk management, and trading style before copying them. Consistent monitoring and adjustments are necessary to maintain passive income.
Traders, on the other hand, can earn passive income by charging fees or commissions for their trades. When other investors copy their strategies, they receive a portion of the generated fees. This can be an additional source of income for successful traders.
However, both traders and investors must be aware of the risks involved in forex copy trading. The traders’ performance can fluctuate, and losses are always a possibility. Before copying traders, investors should assess their risk tolerance and investment goals. Traders should also maintain a consistent and profitable trading strategy to attract and retain investors.

Regulations and Legal Considerations

Forex copy trading regulation varies by country and jurisdiction. Each country may have its own set of rules and regulations governing the operation of copy trading platforms and providers.

Regulations and Legal Considerations of forex trading

When it comes to copy trading platforms and providers in the European Union, they may be governed by the Markets in Financial Instruments Directive (MiFID II). This directive establishes guidelines and standards for investment firms, including those offering copy trading services. The goals of these regulations are to safeguard investors, ensure transparency, and promote fair trading practices.

In the United States, copy trading platforms may be subject to scrutiny by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). These regulatory entities supervise the securities industry and may have specific rules and requirements for copy trading platforms and providers. Different countries may have their own regulatory frameworks for copy trading in forex.
Therefore, it is crucial for investors to conduct research and comprehend the particular regulations in their jurisdiction, as well as to verify that the copy trading platform they use complies with those regulations.


Tips for Successful Forex Copy Trading

Traders and investors in Forex copy trading should remember that “Rome wasn’t built in a day” and should approach their endeavors with careful planning. Hence, we have presented a set of valuable recommendations that, when implemented, can contribute to achieving success in copy trading.

Tips for Investors

  • Conduct research on traders you intend to copy, and analyze their trading strategies, track record and risk management methods.
  • You can mitigate risk and enhance potential profitability by diversifying your portfolio of copied traders.
  • Continuously monitor copied traders’ performance and stop copying if necessary.

Tips for Traders

  • Promote transparency by openly sharing trading strategies, risk management, and track record.
  • Ensure effective risk management by employing robust practices like stop-loss orders and position sizes.
  • Maintain consistent performance by committing to your trading strategy and adapting to market changes since consistency fosters trust and attracts copiers.

How Do I Choose a Reliable Forex Copy Trading Provider?

When selecting a forex copy trading platform, it is crucial to analyze essential features rather than relying solely on a general overview. Hence, we have outlined the necessary infrastructures, functionalities, and key features offered by reputable brokers for investors and traders.

  1. The platform should offer tools for users to find successful traders, view performance history, and manage copied trades.
  2. A trustworthy broker ensures investor protection through encryption technology, secure payment systems, and adherence to data protection protocols.
  3. Evaluate general aspects like interface, customizable features, live trade copying, and advanced analytical tools.
  4. Check if the platform is hosted on robust servers with fast and reliable connections.
  5. Ensure that the platform is compatible with your preferred trading platforms, such as (MT4) or (MT5).
  6. Verify the availability of API integration since it enables traders and developers to link their tools with the copy trading platform.

Top 5 Forex Brokers for Copy Trading

After evaluating various features, let’s now explore a list of the top five brokers known for their outstanding copy trading services and the features they offer.


  • AvaTrade holds a TrustPilot score of 4.7, supported by 7,791 reviews.
  • This broker is located in Ireland.
  • ASIC, FSA, CBI, and EEA regulate them.
  • The minimum deposit amount is $100, and the minimum spread is 0.9.
  • They offer MT4/5 license.


  • FxPro’s TrustPilot score is 4.3, backed by 229 reviews.
  • This broker is located in the United Kingdom.
  • They are regulated by FCA and CYSEC.
  • The minimum deposit amount is $100, and the minimum spread is 0.01.
  • They offer MT4/5 license and offer Ctrader too.


  • With a TrustPilot score of 4.6 and 1,979 reviews, Pepperstone is highly regarded.
  • This broker is located in Australia.
  • ASIC, CYSEC, FCA, and SCB regulate them.
  • The minimum deposit amount is $200, and the minimum spread is 0.6 pips.
  • They offer MT4/5 full license.

CMC Markets

  • CMC Markets has earned a TrustPilot score of 4.2 through 1,608 reviews.
  • This broker is located in Australia.
  • They are regulated by ASIC, BaFin, FCA, BDF.
  • The minimum deposit amount is $0, and the minimum spread is 0.6.
  • They offer MT4/5 full license.


  • FXTM has a TrustPilot score of 2.5, reflecting 748 reviews.
  • This broker is located in the United Kingdom.
  • FCA and CYSEC regulate them.
  • The minimum deposit amount is $10, and the minimum spread is 0.
  • They offer MT4/5 full license.

Mirror Trading in Forex Infographic

Mirror Trading in Forex Infographic

Mirror Trading in Forex Infographic


We have explored the fundamental characteristics of forex copy trading and outlined effective strategies for its appropriate utilization. This article provided a comprehensive perspective, serving both novice and experienced investors and traders. Furthermore, we analyzed the potential advantages of generating passive income through copy trading while addressing the regulatory considerations associated with this practice.

Overall, to ensure success in forex copy trading, investors should conduct thorough research on traders they plan to copy, diversify their portfolio, and monitor their performance. Traders, on the other hand, should promote transparency, implement effective risk management measures, and maintain consistent performance. By following these tips, investors can make informed choices, and traders can attract copiers seeking reliable and dependable strategies.


How does Forex copy trading work?

Forex copy trading involves replicating the trades made by skilled traders. Investors have the option to select a trader to follow and automatically replicate their trades. This is facilitated through an intermediary platform where both traders and copiers must have accounts. Subsequently, traders and investors connect their accounts via API on an MT5 platform that is licensed by the broker to engage in this practice.

What are the risks associated with copy trading in Forex?

The risks associated with copy trading in Forex include the potential for losses due to market volatility, the possibility of following unsuccessful traders, and overreliance on automated systems. Also, traders are exposed to liquidity risk when the currency pairs they trade encounter illiquid conditions during periods of high market volatility.

What fees are involved in copy trading in Forex?

The fees associated with using copy trading in Forex vary based on the platform. However, the most common fee structure involves investors paying fees to strategy managers whenever they generate profits. In addition, other fee structures include trading markups, commissions on trades, performance fees charged by successful traders, and subscription fees for using the copy trading platform.

What are the tax implications of copy trading in Forex?

The tax implications of copy trading in Forex are complex and vary according to the tax laws of your specific country or jurisdiction. Seeking advice from a tax professional is essential, as profits from copy trading are typically treated as capital gains. Factors such as the duration of holding the investments and applicable tax rates come into play. Additionally, when trading across borders, considering tax treaties is important for determining tax liabilities and potential double taxation.

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I am a financial market researcher with 7 years of experience. Also, a cryptocurrency market analyst. I believe in life-long learning and started my academic studies in blockchain and information systems.

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