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Copy trading explained: how it works, what it costs, the risks, and the alternatives

By Saad El Soussi, UAE-authorized finfluencer · Updated 2026-11-08

Copy trading is a service where a platform automatically opens and closes on your account the same trades a chosen trader takes on theirs, scaled to your amount. In the EU it is portfolio management: ESMA ruled in June 2012 that executing another trader's signals on a client's account without the client acting on each trade requires authorisation, and its supervisory briefing of 30 March 2023 lists what providers must do (disclose costs, assess suitability, vet the copied traders). You copy the losses as well as the gains, a moment later and at a higher cost than the trader you copy. A managed account (PAMM/MAM) hands the decisions to a money manager; an automated strategy runs fixed rules on your own account. Before any of the three: check the licence, read the whole record including the worst months, understand every fee, and commit only money you can afford to lose.

Authorized in the UAESaad Nizar El Soussi, founder of SesTrading, is listed by the UAE Capital Market Authority as an authorized finfluencer (entry 193, added 24 September 2026). Check the official list.

How copy trading works

You open an account with a provider that offers copy trading and deposit money.
You pick one or more traders from the platform's list and set the amount that follows each of them.
When the trader opens a trade, the platform opens the same trade on your account, scaled to your amount. When the trader closes, you close. You can usually stop copying or close single trades yourself.
The platform earns from the spread, from fees, and often from a share of the profit that goes to the trader.

Legally this is a mandate: someone else makes the decisions and your money follows. That is exactly why European regulators treat it as portfolio management, not as a social feature.

What it costs

Four layers, and most providers show only the first clearly. The spread on every copied trade, usually wider than on a plain account. A platform or subscription fee, fixed or as a percentage of the money that follows a trader. A performance fee or profit share paid to the copied trader, often charged on winning periods without netting the losing ones. And delay and slippage: your order is sent a moment after the trader's, at the price available then, which in a fast market is worse. Over many trades your result is therefore lower than the trader's before any fee. Under the ESMA briefing, an EU provider must disclose costs and charges and may not make past performance the most prominent element of its marketing; if you cannot get the total cost in your currency for your amount before you start, that is your answer.

The risks the leaderboards do not show

You copy the losses. The record on the list is the past. A trader with three good years can have a bad quarter right after you start. Always look at the maximum drawdown and the worst months, not only the return.
Survivorship. Lists show the traders who made it. The ones who blew up their accounts and left are not on the list, so the list looks better than reality was.
Scaling. If the trader has a large account and you have a small one, some trades cannot be scaled down to the minimum lot (typically 0.01) and are skipped, or become too large for your account. Ask how the platform handles it.
The trader changes style. Many increase their risk once they have followers and earn fees from them. You see it first on your own account.
You learn nothing. When the copying stops, you are where you started, minus the costs. Our Module 3 lesson on automation makes the same point about expert advisors: you cannot set rules for a bot, or judge a trader, without knowing how to trade yourself.

The rules: in the EU, copy trading is portfolio management

ESMA's 2012 Q&A. In ESMA/2012/382 (22 June 2012), question 9 describes a provider that turns a third party's trade signals into orders on the client's account "without further intervention from the client". The answer: that is portfolio management under MiFID and requires authorisation, with the duties that follow, including a suitability assessment, conduct-of-business rules and periodic reports. The client setting limits such as an amount or a maximum loss does not change this. Only when the client has to act before every trade is it not portfolio management; then it may be investment advice or reception and transmission of orders instead.

ESMA's 2023 supervisory briefing. On 30 March 2023 ESMA published a supervisory briefing on copy trading (ESMA35-42-1428). It confirms the 2012 view, because most providers execute the trades automatically, and sets out what national supervisors expect: correct qualification of the service (portfolio management, advice or order transmission), fair marketing and cost disclosure (past performance must cover the preceding five years where available and may not be the most prominent element), product governance, suitability and appropriateness assessment, rules on remuneration and inducements paid to the copied traders, and the qualifications of the traders being copied. It is the document to hold a provider against.

CFD rules on top. If what is copied are CFDs, the EU retail rules apply as well: leverage limits of 30:1 on major currency pairs, 20:1 on gold and major indices, down to 2:1 on crypto, a margin close-out at 50% of the required margin, and negative balance protection (ESMA, March 2018; adopted in June 2018 and since made permanent by the national regulators, ESMA product intervention). They stop you from owing the provider money; they do not stop you losing the deposit. In the United States, retail forex may only be offered by CFTC-registered dealers (look them up in NFA BASIC), and leveraged spot gold is not offered to retail clients at all (see how to trade gold in the US).

Copy trading vs managed account vs automated strategy

	Copy trading	Managed account (PAMM/MAM)	Automated strategy
Who decides each trade	The trader you copy	A money manager	Rules in software (an expert advisor)
Whose account	Yours, with a mandate to the platform	Yours, linked to the manager's master account	Yours
What you pay	Spread, platform fee, often a profit share	Performance fee, often a share of profit, sometimes a management fee	Licence or subscription for the software, plus your broker's spread
Regulatory status in the EU	Portfolio management (ESMA 2012, 2023)	Portfolio management	Depends: a tool you run yourself is not a service; a hosted one may be
Main risk	The copied trader has a bad run, or changes style	The manager's decisions and the fee structure	The rules stop working when the market changes
Can you intervene?	Usually: stop copying, close trades	Usually only by withdrawing	Yes, you can switch it off
What you learn	Little	Nothing	Only if you built the rules

Checklist before you copy anyone

Licence. Find the provider in the register of the regulator of the country it is authorised in. No licence, no money. Our broker checklist links the registers.
Where the money sits. In an account in your own name at a regulated firm, segregated from the firm's own money. Never with an individual or in a wallet.
The whole record. At least a year, with maximum drawdown, worst months, number of trades and average trade size relative to the account. Gains alone are not a record.
Risk per trade. How much of the account does the trader put at stake per trade? More than 2% is a warning sign whatever the return; see stop loss and risk-reward for why.
Total cost in your currency for your amount: spread, platform fee, performance fee, overnight financing.
Your own limits. An amount you can lose entirely, and a total loss at which you stop copying, decided in advance.
The suitability questions. The provider must ask about your experience, finances and goals. If it does not, that in itself is a bad sign.

What our course lesson says about automation

Module 3 of the SesTrading course has a short lesson, "Automate your trades with simple tools". Its key points: an expert advisor (EA) is code uploaded to MetaTrader that trades around the clock on predefined criteria, such as a range breakout with set indicators, timeframes and risk rules; you cannot build or judge one without knowing how to trade, because the strategy has to exist before the bot; copy trading hands the same work to another trader instead of to code; both save time on analysis, and the lesson's advice is not to go fully automated but to place trades manually to learn, keeping any automation as a small side experiment. The written summary is here; the lesson itself is part of the course.

Where SesTrading fits

We do not offer copy trading and we do not trade on anyone's account. Our VIP gold trades are sent with entry, stop loss and targets, and you decide whether and how to trade them; every week the results, losing trades included, are published in our public Telegram channel. That is the slower model: you keep control and learn as you go. How to size a trade from the stop is on the lot size calculator; how gold trades is on how to trade gold; the order to learn things in is on trading for beginners. Trading is risky and most retail accounts lose money.

Ask us how it works

The Telegram bot answers in English, explains the VIP gold trades (each with entry, stop loss and targets) and shows where the weekly results are published, losing trades included. Trading is risky; most retail accounts lose money.

Open the SesTrading botOn Telegram

Questions people ask

Is copy trading legal?

Yes, when the provider is authorised. In the EU a copy trading service that executes trades automatically on your account is portfolio management and needs a MiFID authorisation (ESMA Q&A 2012/382, question 9; ESMA supervisory briefing of 30 March 2023). Copying trades from a Telegram group by placing the orders yourself is not a regulated service, which also means nobody is responsible for the outcome but you.

Is copy trading good for beginners?

It is a way to start with small amounts, if you understand that the trader you copy will also have losing periods, that you pay more than they do for the same trades, and that you learn little while it runs. Our own view, and the lesson's, is to trade manually first, on a demo account, so that you can judge what you are copying.

Can I lose more than I deposit with copy trading?

If CFDs are copied at an EU-regulated provider, negative balance protection applies per account, so the loss is limited to what is on the account. Outside those rules it depends on the provider's terms. In every case you can lose the whole deposit.

What is the difference between copy trading and a PAMM account?

In copy trading your account mirrors another trader's trades one by one and you can usually stop or close them yourself. In a PAMM or MAM account a manager trades a master account to which yours is linked, results are allocated proportionally, and you normally intervene only by withdrawing. Both are portfolio management in the EU.