What are the risks of Forex copy trading?

Hi Everyone,
I have just started doing copy trading of Forex signals on Metatrader. So far I’m having good results, but I’m concerned about the different risks of copy trading. For this reason, I have put together a comprehensive summary of all the risks of copy trading that I could think of and how to mitigate them.

Maybe I have overlooked some risks and if so what are they and how can I mitigate them? Attached is the summary. Please review it and post your comments. I will continue to update the summary with your contributions as this thread expands.

Hopefully our mutual sharing will make us all better positioned individually to profit from our copy trading.

Thank you,

Hi Lemnos, welcome to Babypips.

I looked at your list and see that you have placed a great deal of thought into your search criteria as well as signal selection. My question to you is, what is stopping you from trading manually? I understand that signal providers (SP) offer a promise of passive income. They do the leg work of selecting trades, and, if you picked the right SP, you stand to have a source of income that you didn’t really have to invest in, in terms of time and study.

I’m not saying that is a bad thing, but from what I saw in your list, it seems that would require as much, if not more, effort to maintain and apply than to trade manually. The other downside to SPs (strictly my opinion) is that you are always at the mercy of someone else’s ability and integrity. If they slip up, took a vacation or had a bad day, then it is very ease to not only loose your money, but feel powerless that someone else had the reigns of your earning potential.

Your very well put together criteria suggests that you have the intelligence, ability and aptitude to master forex trading. Perhaps you should give it a go…?? :slight_smile:

Do someone here have trying copy trading??
How does the result?

I agree with godspeed. I have looked into “professional EA’s” and looked at trade signals. The only way to have reliable future profits is to learn it for yourself. The time spent monitoring trade signals is better spent learning the principles. Just my two cents. :slight_smile:

Thanks for the opinions shared so far but we would really like comments on the attached spreadsheet regarding the risks and how to mitigate them.

Nice spreadsheet.
Copy trading is a great tool if you select the right signal. And there are a few doing very well. (of course look for real accounts, decent size, known broker, history…)
The main risk for me is technical : delays and slippage. Delays as master order has first to be filled and confirmed before to go to your platform and to be filled and confirmed too. Slippage due to the delay and brokers different prices.
That’s why I would not recommend scalping strategies with less than 10 pips profit and always prefer MAM or PAMM anyway.

Yes Signals work, but MAM is much more secure as there is not intermediary server, connexion, delay. Just read MQL5 notes on it :

Possible trading signals risks (from MQL5)

[li]When subscribing to Signals, you unconditionally understand and accept all risks associated with the copying of trading operations of others in your trading account:[/li][ul]
[li]No past trading successes of a selected Signals Source can guarantee future profits.[/li][li]Implementation of Signals/Failure to implement Signals can result in differences between your results and the results of the Signals Source.[/li][li]Differences in trading conditions in your trading account and in the account of the Signals Source can jeopardize the possibility of implementing trading signals.[/li][li]Communication failures can lead to missed Signals.[/li][/ul]

[li]The “Signals” service Administration does not take any responsibility for any suffered losses or short-received profit when using or being unable to use the Signals under Subscription.[/li][/ol]

With zulutrade all types of risks are limited and reduced - with proper risk management newbies can make amazingly good returns and reduce market volatility.

I’d agree. Just make sure to act based on calculated decisions, not on impulse and you should be fine.