It is important to understand how the copy trading mechanism works.
If the Follower decides to follow a Strategy Provider while the provider already has open trades, then the system will automatically copy and open these trades for the Follower at the current market price.
It is highly likely that the Strategy Provider is already profitable on these trades when the follower starts copying the strategy.
If the market starts moving against the direction of those trades, the Strategy Provider will be less profitable but may still be in profit. This will result in a loss for the Follower’s trading account though.
Considering that at that time, the provider decides to close these trades, the Follower’s trades will be closed with a loss while his trades will close with a profit.
Another possibility is that the strategy provider has smaller equity than the Follower.
Copy-trading uses the logic of the Equity-to-Equity model to define the volume of all open trades.
The formula is as follows:
(Follower’s equity / Strategy Provider’s equity ) * Strategy Provider’s volume
The Strategy provider’s equity is 1000 EUR while the Follower’s equity is 10,000 EUR.
The provider opens a trade of 100,000 units (1 lot) on EURUSD.
This trade will be copied with the following volume:
(10,000 / 1,000) * 100,000 = 1,000,000 units (10 lots)
When the Provider decides to close his 100,000 units trade it is possible that the executed price will be far better than the closure of the Follower’s 1,000,000 units trade.
This is not something that Skilling has power over but how the market actually works. Different prices per instrument are available for specific volumes. The higher the volume, the higher (more expensive) will normally be the price as well.
We strongly recommend that you watch the Strategy Provider’s equity before making the decision to start copying this strategy.
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