Signals, robots and copy trading
What you learn in 3 minutesThis lesson looks at three ways to hand your trading decisions to someone else: signals, automated systems, and copy trading. The aim is to see what each one actually copies, and which risks stay with you no matter who presses the button. By the end you will be able to put a dollar figure on one day of copied trading on AUD/USD, near 0.6640, and see what that costs in your own account.
One day of copied trading on 0.10 lots of AUD/USD
| Step | Amount | Note |
|---|---|---|
| Position size | 0.10 lots | One tenth of a standard lot, so 10,000 units of AUD/USD |
| Pip value on this size | A$1.00 per pip | One pip on one standard lot is 10 units of the quote currency, so 0.10 lots is 1 unit; at 0.6640 that is about A$1.51, and the broker's conversion makes it vary |
| Movement copied | 20 pips | The distance the copied trade moved while it was open |
| Gross result | A$20.00 | 20 pips multiplied by A$1.00 per pip |
| Cost of the service | A$6.00 | A subscription or performance fee for the day, as quoted by the provider |
| Spread and commission | A$2.00 | Two pips of spread on entry and exit, at A$1.00 per pip |
| Net result | A$12.00 | A$20.00 minus A$6.00 minus A$2.00 |
The broker may round the pip value, charge a commission on top of the spread, or quote a different conversion rate for the quote currency. These figures vary between brokers, so check the contract specifications before you rely on any number here.
The mistake people make here
The common mistake is to treat a signal, a robot, or a copied trade as a transfer of risk. It is not. You still choose the position size, you still hold the losing trade, and you still pay the spread and any fee. Instead, decide your maximum loss in dollars before you copy anything, set that as a stop, and check what the service charges on a quiet day as well as a busy one. If you cannot explain in one sentence what the service copies and what it costs, do not connect it to your account.Check yourself
You copy a trade on 0.20 lots of AUD/USD. It moves 15 pips in your favour and the service charges A$4.00 for the day. The spread costs 2 pips. What is the net result in A$?
Pip value on 0.20 lots is A$2.00 per pip. Gross is 15 x A$2.00 = A$30.00. Spread is 2 x A$2.00 = A$4.00. Net is A$30.00 minus A$4.00 minus A$4.00 = A$22.00.
A robot trades 0.05 lots of AUD/USD and loses 25 pips before it is stopped. What is the loss in A$, before costs?
Pip value on 0.05 lots is A$0.50 per pip. Loss is 25 x A$0.50 = A$12.50, before spread and any fee.