By copying another trader, copy trading applies their trades to your account on autopilot. When a trader that you copy places a trade, that same trade is copied to your account. The risk settings use an equation that means your risk ratio will be the same (or adjusted) as the trader you copy based on your settings and account balance.
Begin Copying when there are no open trades
Let’s assume the Investor selects a strategy to copy, that does not have any open trades at the time. When trades open in the future, the trades will be placed onto the investors account in the same way it is placed on the strategy providers account, factoring in the difference in equity and risk settings.
Begin Copying while trades are open
Copying a strategy with trades open will mean the initial trades will open at the current market price.
Trades after copying has commenced
Once an investor has copied a strategy, they will copy trades based on the risk parameters that are set and in line with the strategy. For example if you are wanting to trade at 2 times risk, and the trade is set as 1 lot on the strategy provider side, the investor’s account would be trading 2 lots for the same trade (if the equity was the same). If the equity is different, the volume will be ‘normalised’ into the ratio of difference in equity.
Lots and Risk Calculations
Equity Factors
Lot sizing will be determined by difference in equity between the Strategy Provider and Investor accounts. If the account is 1:1 (or $1,000 each) the lot sizing will be equal. If the account is 2:1 (or $2,000 and $1,000 respectively) the $2,000 account would be double the lots used to trade.
As an example for the equity difference, if the Strategy Provider trades 1 lot, on a $1,000 account, the investor account has $10,000 in equity, then their trade will be trading 10 lots if the risk parameter is 1:1 or equal to the strategy provider.
Risk Factors
This works in a similar way that the equity factors work. It is simply a ratio between the standard risk of the Strategy Provider and the Investor account. If the Investor opts for double the risk, the lots would be 2x that of the Strategy Provider.
Combo of Factors - Equity & Risk
To reconfirm the equity and risk factors and see what happens when the concepts combine, here is an example.
Equity of $1,000 and 1 Lot on the Strategy Provider account
Equity of $5,000 and 3 times risk factor on the Investor Account, the risk would be 5 times higher on the lots based on equity and 3 times the lots based on risk factor. This means the lot size should be 15 lots compared to 1 lot, so 5 x 3 = 15 lots.