Before we discover the trading capabilities of XM’s copy trading platform, let’s first understand what copy trading is in the world of Forex and CFD trading. 

Copy trading is also known as mirror trading and as the name suggests, it helps one group of traders copy other traders. In general, copy trading is used by beginner traders, investors, or individuals that wish to participate in the markets and do not have time to actively manage orders themselves. 

Traders that copy others are also known as “followers”, and the professional traders that they copy are often referred to as “leaders” or “signal providers”. Once the followers and signal providers are connected on their trading platforms, trading takes place automatically, using trading algorithms. Followers can choose their risk tolerance, and adjust their copy trading balance according to their preferences. Some trading platforms even allow followers to manually intervene in the trading process and adjust important metrics such as Stop Loss (SL), and Take Profit (TP), open or close trades, and decide when to fellow their leader. 

Signal providers typically sell their services, however, there are also traders that can be followed free of any charge. Beginner traders often do not realize the risks that are associated with trading and pick leaders to copy with highest returns. While returns are important, it’s also super important to assess how signal providers can manage their risks. Forex brokers make this information available for the followers on copy trading pages. 

Copy trading is done by trading algorithms. In MetaTrader’s case, the algorithms that help automate trading are called Expert Advisors (EAs), in cTrader automation is achieved via cBots. The algorithms mirror trades with great accuracy and size each trade based on percentage point ratios and not on absolute numbers. 

Advantages of Copy Trading

There are a couple of key benefits that come with copy trading. Let’s discuss each in more detail and see if it’s a good idea to copy trade.

• It takes little time: one of the main reasons why traders decide to copy trade is that they want to participate in the financial markets but do not have much time to spend on studying the ins and outs of trading or actively researching the markets. Copy trading offers an amazing opportunity to delegate decision making.
• Helps traders diversify their risks: copy trading can help traders diversify risks by investing in multiple professional traders from different asset classes. 
• Offers learning opportunity: observing how professionals make trading decisions is a great way to learn how they think and what they base their trading decisions on. 
• Potential for passive income: copying other traders doesn’t take much mental or physical effort. Earning income with least participation creates passive income. 
• It’s easy to study signal providers: all the information traders need to assess signal providers’ performances is easily available on copy trading pages. However, the starting and physical balance may not always be presented, only percentage points, which makes analysis more difficult. On the upside, XM shows Best and Worst trade in money terms, which can help greatly find professional signal providers. 
• Can become a good source of income for signal providers: leaders often charge traders that follow them. This shows that you too can become a signal provider if you can be consistent with your results. Many traders turn selling signals into their careers and earn significant income. 

Risks and Challenges

• Returns aren’t guaranteed: no matter how followers study the past performance of signal providers, it is never guaranteed that the profitable trading will continue. Market conditions change and strategies and approaches of old ties often fail to keep bearing fruit.
• Followers become dependent on the leaders: often this is the result of reliance on a single signal provider. Lack of options is never a good thing in life, this rule is also true in investing. 
• Lack of control: followers might have little control over the trading decisions, dependent on the trading platform. In addition, even when followers have tools to intervene, knowing how and when to do it is difficult, especially for the beginners. 
• Quality of Signal Providers: Finding a signal provider that best fits your trading goals is always difficult. Performance measured in percentage points doesn’t paint the whole picture. Fellowers need to know the amount of capital that was invested by the signal provider. This has a simple explanation, managing 100 USD on the markets is one thing and managing 10K USD is another. 

XM makes it super easy for its client base to engage in copy trading, allowing them to replicate the strategies of successful traders effortlessly. The XM’s copy trading platform enables users to browse and select successful traders from a diverse range of skilled traders, each with their unique approaches to trading. What’s best about this platform is that traders can easily find signal providers that focus on different markets, such as Forex, Indices, commodities, and crypto. In addition, there are algorithmic traders that sell their signals.

The copy trading platform at XM is designed to help traders find exactly what they’re looking for with the least amount of effort. Traders can use smart filters and find traders based on the following criteria: 

• Most popular:
• Best performer
• Low risk
• Low drawdown
• Low fees
• Most invested, etc. 

Once traders get the toplist of signal providers, they can check each signal provider’s performance individually. Keep in mind that it is important to check each trader thoroughly.

The platform is designed to give investors all the information that they need efficiently. It’s not enough to simply check the win/loss ratios or performance graph. It is best to also take into account the number of trades and best and worst trade amount. It’s always a bad idea to follow traders with low accountability and responsibility. Overall, the platform provided by XM is super transparent and investor-friendly. 

To get started with the XM copy trading, traders first need to have active trading accounts. Just log into your XM account, and open “Copy Trading” from the “TRADING” section. 

The next step is to create an Investor account. First, login to your member’s area and select the “Copy Trading Banner. Afterwards, click the “Create Investor” on the top right corner of the page. Fill in required information and follow the instructions for creating your account. 

The whole process takes only a couple of minutes and you’ll be able to copy successful traders with a click on a button. 

Copy trading is not a risk-free business, especially for beginners. It’s never guaranteed that the professional trader makes money in the future even if his past performance is amazing. However, past performance is one of the best predictors of the future. Traders and beginner investors that want to copy trade, need to have their own criteria on how to select the signal providers. Here are some tips that can help you in this process:

• Prior to selecting a trader to replicate, conduct a comprehensive examination of their trading history, performance metrics, and risk levels. The larger the information, the better. Avoid assessing traders based on only a couple of trades. 
• You can choose multiple traders to copy to diversify your risks. For instance, you can follow conservative traders with tight risk management, and signal providers with higher risk tolerance/return potential. In addition, you can diversify your investments based on different markets. 
• Keep an eye on market developments to avoid copying traders when market conditions change. Often, when new, unpredictable events occur, many traders are unable to cope with them and open losing trades. 
• Periodically analyze your copy trading portfolio to evaluate the performance of individual traders and find underperforming traders. 
• Look for a trader to copy that can manage drawdown periods well. Every trading strategy can experience losses, however, traders that are good at risk management avoid losing large amounts during such periods. They limit their exposure to markets, start testing and improving their strategies on demo accounts. And once they rebuild their trading confidence, they return to the trading scene. You can easily assess how traders manage drawdowns by looking at their performance on charts. Large and sudden drops in capital indicates the signal provider has failed to save the trading balance in the past, and this can increase your funds safety if you decide to follow that trader. 
• Stay engaged in the learning process. Especially if you are following various professional traders, you get a unique chance to observe their decision making. It’s best to have a journal and analyze each trader's progress separately. It’s important to note that every trader is different, and they all have their advantages and disadvantages, however, learning about successful traders’ decision making process can help you find what works best for you. 

To sum everything up, copy trading comes with its pros and cons. It’s a great way for most individuals with limited time and knowledge to participate in financial markets, it offers learning opportunities, and opportunities to generate passive income. As a downside, copy trading is not guaranteed to generate income and it may create overreliance on signal providers. 

XM has one of the largest customer bases, in particular over 5 million scattered around the globe. The broker offers a user-friendly and intuitive page for finding or selling trading signals to its customers. Traders that wish to find professional traders to follow are provided with all the necessary information they need to assess traders’ performances. Overall, we can say in great certainty that XM is one of the best copy trading providers in the world.