how does copy trade work

How does Copy Trade Work?

In 2005, the copy trading mechanism was developed from automated and algorithmic trading. As a mirror derivative, it became an automated system where traders take on the positions of any chosen investor in the financial market. More importantly, less experienced traders can easily take on the financial positions of more experienced pros in the financial markets.

In this article, we will take you through how the copy trading mechanism works, the pros and cons, and the best platforms you can use in Malaysia.

The Mechanism of Copy Trades in Malaysia

Copy trading is quite popular in Malaysia as many residents are occupied with work and traffic bubbles during most hours of the day. Due to the quite busy schedule, this mechanism is the easiest way to get on the forex markets.

However, nothing can stop Malaysians as the number of active Forex traders in the country was reported to be around 8 million (OctaFX, 2021). This is more than 8 times the population of Kuala Lumpur, the country’s capital.

Apart from being popular, the mechanism has also proved largely successful. A survey conducted in 2013 by IBM research showed that copied positions are more likely to yield positive returns than standard trades. However, the study also showed that its return on investments tends to be lower than standard trades.

Also, its losses tend to be more significant when on the wrong side. So, to ensure you don’t end up on the latter, this section will explain how it works and the best practices.

How to Execute a Copy Trade

To execute a copy trade, here are the steps to follow:

1. Pick a platform

Various platforms allow users to take on the positions of other investors. Examples include eToro (one of the best investment apps in the UK), Tradency, FXTM, etc.

2. Choose a Trader to Follow

After picking a platform, look through the different traders who have public accounts. Then, choose a few traders with different strategies to spread your portfolio.

3. Take on Their Positions

After picking the trader, there are various ways to replicate their positions. There are two options available: to duplicate all open positions or all the positions opened after following the trader. Other options include setting stop loss or profit marks, pausing, or stopping the copy. These steps might vary depending on the platform.

Also, you should know that platforms calculate copied positions in percentages. For example, if an investor places a trade worth $100 and has a portfolio worth $2000. That trade is worth 5% of his portfolio. If you duplicate that position and you have a portfolio worth $1000, then the trade will be worth $50 in your portfolio.

However, there’s no need to worry about these calculations as the platform does it automatically.

Types of Copy Trades

Many brokers offer various ways to copy positions. However, they vary in the level of control they allow. There are three types, which include:


This method involves a higher level of control. After choosing the signal provider to follow, you then decide which of their trades to copy. This is also known as social trading.


In this method, you can choose the positions to have manual control and the ones to follow the signal provider totally. After checking all their positions, you simply pick the positions that will be in both categories.


In this method, all the positions of the signal provider are automatically copied.

Best Copy Trade Practices

However, to prevent huge losses, there are some advisable practices to observe. These include:

1. Diversification

If you plan to put a large number of funds into copy trading, it is advisable to spread your funds between different traders. Also, make sure these traders use different strategies and trade different currency pairs.

Other diversification methods include copying traders who trade in different time frames, different levels of activity, and different levels of volatility. By following this, you won’t lose your portfolio completely in the event of a bad trade.

2. Stop Loss

When duplicating the position of any investor, you must put in a stop loss for each trade. There’s a higher chance you don’t understand the investor’s strategy, and might not have large funds like some investors. So, you should place a stop loss to prevent losing all your funds. Once the trade hits your stop loss, the platform immediately logs you out of the trade.

Finally, you should ensure you do your research before picking any trader to follow. This is an important practice you must carry out thoroughly before replicating any position. It is vital that you don’t follow unproven traders. Also, remember that past results aren’t a sure indicator of future forecasts.

Social Trading vs. Copy Trading

These are two terms that are primarily seen as dependent on each other. While they do share similarities, they are very much different. The table below will differentiate that clearly:

Social Trading

Copy Trading

Social trading requires the presence of a network of traders who share ideas about trading strategies. Copy-trading simply requires a trader imitating the positions of a highly successful or experienced trader.
There’s a support system and community for new traders to hone their skills. Copy-trading does not help a trader get better at their strategy.

Best Copy Trades Platforms in Malaysia

Although eToro is one of the biggest copy trading brokers, their services are not available in Malaysia. This section will walk you through some of the best platforms in Malaysia:

FXTM – Best Platform for Beginners

FXTM has one of the best copy trading systems in FXTM Invest. Their platform allows you to choose a trader and you’ll follow their strategies. Once you fund your account with $100, the platform activates your Investor account. Then, you can duplicate the positions of your chosen trader (called strategy managers on FXTM). They also offer a lot of analytical materials to help beginners hone their skills.

MTrading – Best Mobile Experience

MTrading is a broker that allows you to trade various commodities, securities, and special metals. Catering to users in the Asia-Pacific, Africa, and South American Regions, MTrading is a broker that supports its clients with great services.

With their mobile app and web version both quite adapted to mobile, you can trade wherever you are, and however you want. Finally, their mechanism allows you to either automatically or manually duplicate the positions of other traders.

OctaFX – Best Broker with Bonuses

OctaFX is popular for the various bonuses they offer to Malaysian traders, such as first deposit bonuses, demo trading contests, and live trading contests, which have awesome prizes. Their mechanism allows replicating trades placed by experienced traders known as Master Traders. You can check out the trading stats and the commission rate for every Master Trader in the Copier section of the app.

Get in on the Art of Copy Trading

This mechanism gives less experienced traders a chance at taking positions of pros in the financial markets. While it is a less stressful method that can yield premium benefits, honing the technicalities to trade the markets yourself might give you a better sense of security in the long run.

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