What are the main risks of copy trading?

Market risk (the trader can lose), over-sizing a large account’s trades into a smaller one, slippage on fast or thin markets, over-concentration in a single strategy, and over-trusting a short track record. None of these are unique to copy trading, but copying can amplify them if you are not careful.

How do I reduce copy trading risk?

Size conservatively, set position-size and daily-loss limits, use slippage protection, diversify across strategies, and keep a kill switch. With RelayTrades these are enforced server-side before any order, and you can switch to manual approval or pause anytime.

Can risk controls guarantee I won’t lose money?

No. Risk controls reduce and cap downside, but they cannot remove market risk. All trading involves risk, and past performance is not indicative of future results.

What is a kill switch in copy trading?

A kill switch is a one-tap control that immediately halts all automation and flattens your open positions. With RelayTrades it works on your own brokerage account, giving you a fast way to stop everything if you want out.

Copy Trading Risks and How to Manage Them

June 21, 2026 · 6 min read

Quick answer

The main risks in copy trading are market risk (the trader you follow can lose money), over-sizing a big account’s trades into a small one, slippage on fast or thin markets, over-concentration in a single strategy, and putting too much faith in a past track record. You manage them by sizing conservatively, setting position and daily-loss limits, using slippage protection, diversifying across strategies, and keeping a kill switch. Risk controls reduce downside but never remove it.

Part of the complete guide to copy trading.

Copy trading automates a strategy, but it does not remove the risks of trading, and it adds a few specific ones. Knowing them, and how to manage each, is the difference between using copy trading as a controlled tool and getting blindsided.

Market risk: the strategy can lose

The most basic risk is that the trader you follow makes losing trades, and you copy them. No strategy wins all the time, and past performance is not indicative of future results. Manage it by choosing strategies carefully, diversifying, and never sizing positions larger than you can afford to lose.

Over-sizing: a big account’s trade in your small one

If a trader with a large account takes a big position and it is copied at full scale into a smaller account, the impact is magnified. Manage it with proportional sizing and a maximum position size. RelayTrades scales copies to your account and caps anything that would breach your limits before the order is placed.

Slippage: your fill differs from the signal

Between the moment a signal is generated and your order fills, the price can move, especially on fast-moving or thinly traded instruments. Manage it with slippage protection, which prevents a copied order from filling far worse than expected.

Over-concentration and over-trust

Putting all your capital behind a single trader, or trusting a short, perfect-looking track record, concentrates your risk. Spread across more than one strategy, review full histories including drawdowns, and treat any track record as historical information rather than a promise.

Your toolkit for managing it

Position-size limits and a sizing multiplier so no single trade is too large for your account.
Maximum exposure and concurrent-position limits to cap how much is at risk at once.
Daily-loss caps that halt copying if losses hit your threshold for the day.
Slippage protection to avoid bad fills.
A one-tap kill switch that stops all automation and flattens open positions instantly.
Manual approval mode, so you can review trades before they are placed instead of auto-copying.

Risk controls reduce your downside, they do not eliminate it. With RelayTrades these limits are enforced server-side before any copied order is placed, but all trading involves risk and you can still lose money.