Signals, robots and copy trading
Signal services and what they copy
A signal is a message that says buy or sell a named instrument at a certain price. The message may arrive by app, email or chat room. It is not an order. It is a sentence about what someone else is doing or would do. The signal provider may be a person, a company or a group. The message often includes a suggested stop and target. None of that is connected to your account until you act on it.
What the service copies is only the direction and the timing. It does not copy the provider's account size, their risk per trade, or their reason for the entry. If the provider trades 5 lots and you trade 0.05 lots, the same signal produces a hundredth of their profit or loss. The signal itself has no size. You choose the size. That choice is where your risk lives, and it stays with you.
Signal services usually charge a subscription, a one-off fee, or a fee per signal. Some are free and earn from broker referrals. The cost is fixed in dollars, while the outcome is not. A service that costs A$50 a month needs A$50 of gross profit from your trading just to break even on the fee alone. Spread and commission come on top. That is before any losing trade is counted.
Automated systems and the rules inside them
An automated system, often called a robot or an expert advisor, is software that watches prices and sends orders to your platform without you clicking. It follows rules written by someone else. The rules may be simple, such as buy when a short-term average crosses a longer one. They may be complex, with many conditions. The software does not understand why the rules exist. It only repeats them.
What the system copies is a set of decisions, not a person. It copies the entry logic, the exit logic and the position sizing formula. If the formula sizes each trade at 2 per cent of account equity, that is what it will do on your account too. On a small account, 2 per cent can be a few dollars of risk. On a larger one, it is more. The robot does not know your rent, your savings or your comfort with loss.
Automation removes hesitation but it also removes the pause where you might notice something wrong. A robot can keep trading through a news release, a public holiday or a platform outage. It can also keep trading after the market conditions that suited its rules have gone. You still hold every position it opens. You still pay the spread on every trade it places. You can switch it off, but you cannot switch off the loss already taken.
Copy trading and the risk that stays yours
Copy trading links your account to another account so that trades are mirrored automatically. The link may be through your broker or through a separate platform. When the copied account opens a trade, your account opens a similar trade, usually with a size set by a ratio you choose. When it closes, yours closes. The copying is mechanical. The relationship is not a partnership, and the other person does not owe you a duty of care.
What gets copied is the trade direction, the entry, the exit and the timing. What does not get copied is the other account's balance, its leverage, its margin buffer or its ability to withstand a drawdown. If the other account can hold a losing trade for weeks and yours cannot, the same trade can end very differently. Your stop, your margin and your available funds are yours alone. The copier cannot see them.
Copy trading platforms often show past performance as a chart or a percentage. Past performance is a record, not a forecast. A track record built in a trending market may not survive a quiet one. The platform may charge a management fee, a performance fee or a spread markup, and these vary between providers. A performance fee takes a share of profits, so a winning month can still leave you with less than the gross figure suggests.
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.
Doing it once, step by step
The following steps put a dollar figure on one day of copied trading on AUD/USD, near 0.6640, using the numbers in this lesson. Work through them in order with a calculator and the contract specifications from your own broker.
- 01
Write down the pip value for your size
For AUD/USD, one pip is 0.0001 in the price. On 0.10 lots, the pip value is about A$1.00 per pip. On 0.20 lots, it is about A$2.00 per pip. Check your broker's contract specifications, because the exact figure can vary with the conversion rate used for the quote currency.
- 02
Measure the gross result of the copied move
Suppose the copied trade gains 15 pips on 0.20 lots. Multiply 15 by A$2.00 to get A$30.00 gross. If the trade had lost 15 pips instead, the gross loss would be A$30.00. The size you chose sets both numbers.
- 03
Subtract the spread cost
The spread is the gap between the buy price and the sell price. If it is 2 pips, multiply 2 by the pip value. On 0.20 lots that is 2 times A$2.00, which equals A$4.00. This cost is charged on entry and is already gone before the market moves.
- 04
Subtract any service fee
Add the daily or monthly fee charged by the signal, robot or copy service. If the fee is A$4.00 for the day, subtract it from the gross result. Fees are fixed in dollars and do not shrink when the trade loses. Check whether the fee is charged on quiet days as well as busy ones.
- 05
Check the net and compare with your limit
For the example, A$30.00 gross minus A$4.00 spread minus A$4.00 fee leaves A$22.00 net. Now repeat the sum with a 15-pip loss. The gross is minus A$30.00, the spread is still A$4.00 and the fee is still A$4.00, so the net is minus A$38.00. Compare that loss with the maximum you decided to risk before you copied anything.
- 06
Confirm the costs in writing before you connect
Ask the service for its fee schedule and ask your broker for the spread and commission on AUD/USD. Check whether the broker rounds the pip value or applies a different conversion rate. If you cannot explain in one sentence what the service copies and what it costs, do not connect it to your account.
The mistake most 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$12.50, before spread and any fee.
Questions that come up next
If a signal service has a good record, does that lower my risk?
No. A record describes what happened in the provider's account, at their size and their risk per trade. It says nothing about your account size, your stop distance or your costs. The same signal can be profitable for one account and a loss for another, because the position size differs. Your risk is set by the size you choose, not by the record you read.
What does a robot copy from the person who wrote it?
It copies the rules, not the person. The entry condition, the exit condition and the sizing formula are repeated on your account. It does not copy the writer's account balance, their tolerance for loss or their reason for the rules. If the rules size each trade at a fixed percentage, that percentage applies to your equity, which may be much smaller or larger than theirs.
Does copy trading mean someone else carries the loss?
No. Copy trading repeats the trades in your account at your chosen size. The trader you copy may close a position at a loss while you are asleep, and the loss lands in your account. If your account cannot support the size, the broker may close positions for you. The person you copy has no obligation to cover your result.
What costs apply even when a copied trade wins?
The spread is charged on entry and exit, and it varies between brokers. A commission may be added on top. The signal or copy service may charge a subscription, a per-trade fee or a performance fee. All of these are fixed in dollars or pips, while the outcome is not. A winning trade can still leave you behind once the day's fees are counted.
How do I put a dollar figure on one copied trade before I take it?
Write down the lot size, the pip value in A$ and the stop distance in pips. Multiply the stop distance by the pip value to get the loss if the stop is hit. Add the spread cost and any fee. That total is your maximum planned loss for the trade. If you cannot state it in one sentence, the size is too large or the service is unclear.
Can I stop a robot or a copy service in the middle of a trade?
You can usually disconnect the service or switch the robot off, but that does not close positions already open. Those positions remain in your account until you close them or a stop does. A platform outage or a fast market can delay the close. The decision to exit stays with you, even after the service is gone.
The words used on this page
- signal
- A message that suggests buying or selling a named instrument at a certain price. It is not an order and does not reach your account until you act on it. The provider's size and risk are not included.
- robot
- Software that watches prices and sends orders to your platform using rules written by someone else. It repeats those rules without understanding them. You still hold every position it opens and pay the spread on each trade.
- copy trading
- A service that repeats another person's trades in your account at a size you choose. It copies direction and timing, not their account balance or their tolerance for loss. Your risk stays with you.
- pip value
- The money one pip of movement is worth for the size you are trading. On 0.20 lots of AUD/USD it is A$2.00 per pip. It changes with lot size and is often rounded by the broker.
- spread
- The gap between the buy price and the sell price, charged on entry and exit. It is a cost on every trade, win or lose. The amount varies between brokers and with market conditions.
- stop
- An order that closes a losing trade at a level you set in advance. It turns a planned maximum loss into a dollar figure. Without it, a loss can grow beyond what you intended.
What to take away
- A signal, a robot and a copy service each hand over a decision, not the risk. You still choose the size, hold the losing trade and pay the spread and any fee.
- Before you connect anything, write your maximum loss in A$ for one day and set it as a stop. Then 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.
- Pip value, spread and fees vary between brokers, so check the contract specifications before you rely on any figure.