copy trading platform screenshot

Difference between copy trading and a hedge fund

If you are wondering if there is a difference between copy trading and a hedge fund, yes there is! You cannot compare copy trading with a hedge fund or a money manager.

Copy trading something you see a lot these days. Copy trading is also known as social trading, MAM trading, copy trading or sometimes signal service (also automated signal services). Most brokers offer a copy trading service where you can register as a client (copier) or as a trader (signal provider). You can see a top list with traders who traded best for the selected period.

Copy trading

Technically copy trading works like this: The trader makes a trade. Because your account is always live on a VPS or other server your account receives a signal that you master trader has made a trade. At that point your account will make the same trade in the same size or in a proportional size, depending on your settings. If the master account closes the trade a signal will be send to your account and your position will be closed to.

You can imagine because there is some communication back and forth that there is some delay. This delay is called slippage. Because of the slippage you will never have the exact same results as the master trader. Also on most platforms the fees you need to pay to the broker and the trader are extremely high. The profits won’t be as expected.

Last thing about copy trading is that you will still have access to your own trading account. This means you can make trades your own on the same account. This is where most people make mistakes and trade on their own.

Hedge funds and money managers

With a hedge fund or money manager it is completely different. If you invest in a hedge fund, or let a money manager trade for you, you won’t be able to trade your own funds. All your funds will be put in a common fund, there is only one account with money in it. This common fund will be traded. At the end of every investment period, 4 weeks, the money and profits will be split according percentage that you own in the common fund.

For example take our strategy 1 or strategy 2. You can look at the strategies as both different pools where you can invest in. Strategy 1 is separate from Strategy 2. The funds are not connected and so you don’t risk money in Strategy 1 with Strategy 2.

Because in a hedge fund everything is traded from one and the same account per strategy you don’t have to deal with slippage. Also the fees are only paid once and the same for all. And last but not least, you let the trading do completely by experts. So you can’t make mistakes on your own.

Advice

So the difference between copy trading and a hedge fund is enormous. Fees, slippage, mistakes and expertise. With copy platforms everybody can register as a copy trader and gain followers. You see a lot of providers come and go. They perform and make money, than eventually they disappear when they make losses.

Also most copy trading platforms are sensitive to fraud, fraud of traders not brokers. It is really attractive to open a account as trader and gain followers who will pay you a fixed fee or commission on profit. For some people it is making easy money, just do the math yourself. That is why they want to rank high in the charts and gain followers. Therefore they need high percentage profits. That is why on the platforms 1000% profit is not a rare percentage of profit to find. They have tricks to manipulate the gains, and so it makes platforms less trustworthy.

So as you can see there is a big difference between copy trading and a hedge fund. Off course we do advice you to not invest in copy traders but put your money somewhere where the experts are. Our easy hedge fund makes it possible for everyone to invest in hedge funds with our low minimum of just $2.500 USD.

Tweakers

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