Now that we know what copy trading is and how it works, let’s talk about the structure of copy trading. In most cases, there are 5 basic components that make the structure of copy trading. These are The Market, The Broker, The Trader, The Investor, and The Platform.
The Market, or The Financial Market, is essentially the base. This is where all of the trades are executed. These are done on exchanges and markets around the world, such as the New York Stock Exchange.
The Broker is an investors means of trading in the market, and is therefore essential in copy trading because without it, you basically can’t make any trades. You need a broker to get a trading account so that you can receive your copied trades from another trader.
The Trader, also known as The Signal Provider, is the trader (or traders) you decide to copy. All of their actions and open trades are executed in your broker account, unless you’re using their own platform where profits are paid to you without the need for broker account. Although in most cases you can just copy a trader straight away, you need to know the trader’s performance before you copy him. Some Platforms evaluate the strategy used before allowing it, while others just record their data the moment they joined. This all makes data that the user can use to determine whether this trader can make good profits or not.
The Investor is the person copying trades. This can be an individual or company depending on the nature of the platform and invested funds.
The Platform, or Copy Trading Platform, is a very important component in this structure because without it, it would be impossible to do any copy trading. The broker might be the bridge between a trading account and the trader, but the Platform is where everything takes place.