Signals, robots and copy trading
What you learn in 3 minutesA reader asked: "If I pay for signals or a robot, who actually carries the loss when the trade goes wrong?" This lesson answers that by looking at three ways to hand a decision to someone else: a signal service, a trading robot, and copy trading. Each one changes who decides, but none of them changes whose money is on the line. The rand figures below show what each route can cost you before any trade is even placed.
Three ways to trade someone else's decision, and the rand cost of each
| Step | Amount | Note |
|---|---|---|
| Signal service | R450 per month | A typical subscription fee quoted by signal providers; the amount varies between providers. |
| Signal trade on USD/ZAR | R1 841 profit or loss | One standard lot on USD/ZAR at 18.4100 moves about R18.41 per pip. A 100 pip move is 100 x R18.41 = R1 841. |
| Trading robot | R1 200 once-off | A common one-time purchase price for an automated strategy; prices vary widely. |
| Robot trade on USD/ZAR | R920.50 profit or loss | 0.50 lots at 18.4100 is about R9.205 per pip. A 100 pip move is 100 x R9.205 = R920.50. |
| Copy trading | R300 per month plus 20% of profit | A performance fee structure some platforms use; terms vary between platforms. |
| Copied trade on USD/ZAR | R3 682 profit or loss | 2.00 lots at 18.4100 is about R36.82 per pip. A 100 pip move is 100 x R36.82 = R3 682. |
| Total cost before any trade | R1 950 | R450 + R1 200 + R300 = R1 950 across all three routes in one month. |
The broker may round pip values, add spreads, commission or overnight swap charges on top. These figures are examples, not quotes. Your own broker's numbers will differ.
The mistake people make here
The common mistake is thinking that paying someone else moves the risk to them. It does not. A signal provider, a robot seller and a copied trader all keep their fee whether your account grows or shrinks. The loss on the trade still lands in your account, and with copy trading the position size is often larger than a beginner would choose alone. Before paying for any of these, work out the rand loss on a 100 pip move at the size that will actually be copied, and check that the provider is registered with the FSCA. If you cannot afford that loss twice over, the size is too big.Check yourself
A signal service charges R450 per month. You follow one trade on USD/ZAR at 18.4100 with 0.20 lots and it moves 80 pips against you. What is your loss, and what is the total cost including the fee?
0.20 lots at 18.4100 is about R3.682 per pip. 80 pips x R3.682 = R294.56 loss. Add the R450 fee: R294.56 + R450 = R744.56 total cost.
A robot costs R1 200 once-off and trades 0.10 lots on USD/ZAR at 18.4100. It makes 60 pips. What is the net result after the purchase price?
0.10 lots at 18.4100 is about R1.841 per pip. 60 pips x R1.841 = R110.46 profit. Net after the R1 200 cost: R110.46 - R1 200 = -R1 089.54, a loss.
Copy trading copies a trader using 1.00 lot on USD/ZAR at 18.4100. The trade moves 50 pips in your favour. The platform takes 20% of profit. What do you keep before other costs?
1.00 lot at 18.4100 is about R18.41 per pip. 50 pips x R18.41 = R920.50 profit. The platform takes 20%: R920.50 x 0.20 = R184.10. You keep R920.50 - R184.10 = R736.40.