Copy Trading Glossary
Clear, plain-English definitions of the copy trading and trading terms you are most likely to run into, from position sizing and drawdown to slippage, leverage, and the risk controls that keep a copied strategy in bounds. New to the topic? Start with what copy trading is or the complete guide to copy trading.
A
- Auto Routing
- Auto routing (automatic mode) is when copied trades are placed in your account automatically as signals arrive, within your preset limits, with no manual confirmation step. It is faster than manual approval but relies entirely on your risk settings to keep trades in bounds.
B
- Backtesting
- Backtesting is evaluating a strategy against historical data to see how it would have performed. It is useful for understanding behavior but has limits: past performance is not indicative of future results, and a strategy can be over-fitted to history.
C
- Concurrent-Position Limit
- A concurrent-position limit caps how many positions can be open at the same time in your account. It is a risk control that prevents a flurry of copied signals from opening more positions, and more total exposure, than you intend.
- Copy Trading
- Copy trading is automatically replicating another trader’s trades in your own brokerage account. When the trader you follow places a trade, a matching order is routed to your account, sized to the rules you set. You keep your money in your own account and control the sizing, risk limits, and an off switch.
- Correlation
- Correlation measures how closely two things move together. Copying several strategies that all trade the same names in the same way is not real diversification, because they are highly correlated and tend to win and lose together.
- Custody
- Custody is the holding of your funds or assets. In copy trading done correctly, your money stays in your own brokerage account, the software platform never takes custody. A service that asks you to deposit into a wallet it controls is a different, higher-risk arrangement.
D
- Daily-Loss Cap
- A daily-loss cap (or daily-loss limit) is a rule that stops trading once your losses for the day reach a set amount. It is a circuit breaker that prevents one bad session from doing outsized damage. RelayTrades can enforce a daily-loss cap server-side.
- Diversification
- Diversification is spreading risk across different, non-correlated positions or strategies so that one losing bet does not define your results. In copy trading, following a few genuinely different strategies diversifies away the risk of relying on a single trader.
- Drawdown
- Drawdown is the decline from a peak to a subsequent low in an account or strategy’s value, usually expressed as a percentage. Maximum drawdown tells you the worst peak-to-trough loss a strategy has experienced, a key risk measure when evaluating who to copy.
E
- Equity
- Equity is the total current value of your trading account, including cash and the market value of open positions. It rises and falls as your positions move, and is the basis for measuring returns and drawdown.
- ETF
- An ETF (exchange-traded fund) is a basket of securities that trades on an exchange like a single stock. ETFs are a common, generally lower-cost way to get diversified exposure, and are widely supported for copy trading across brokers.
- Exposure
- Exposure is the total amount of your capital committed to the market at a given time across all positions. Exposure limits cap how much of your account can be at risk at once, so multiple copied trades cannot quietly add up to more risk than you intend.
F
- Follower
- A follower (or copier) is a trader who subscribes to a strategy provider’s signals so that their trades are replicated in the follower’s own account, sized to the follower’s settings.
K
- Kill Switch
- A kill switch is a one-tap control that immediately halts all automation and can flatten open positions. It is the ultimate safeguard in copy trading: if something looks wrong, you can stop everything at once rather than waiting for the next signal.
L
- Latency
- Latency is the delay between an event and the response to it, for example the time between a strategy provider’s trade and your copied order being placed. Lower latency means your fill is closer to theirs; some delay always exists and can contribute to slippage.
- Leverage
- Leverage is using borrowed capital (such as margin) to take a larger position than your cash alone would allow. It magnifies both gains and losses, so copying a leveraged strategy increases risk. Understand whether a strategy uses leverage before following it.
- Liquidity
- Liquidity is how easily an asset can be bought or sold without moving its price much. Liquid markets generally mean tighter spreads and less slippage; thinly traded names can be harder to copy cleanly.
M
- Managed Account (PAMM/MAM)
- A managed account is an arrangement where a manager has discretionary authority to trade pooled or delegated funds on your behalf (for example a PAMM or MAM). This differs from copy trading, where you keep your own account and control the sizing and risk limits yourself.
- Manual Approval
- Manual approval is a mode where copied trades are presented for you to confirm before they are placed, rather than routed automatically. It is a useful setting while you learn how a strategy behaves or when you want a human check on each trade.
- Margin
- Margin is money borrowed from your broker to trade a larger position, or the collateral required to hold a leveraged position. Trading on margin increases both potential returns and potential losses, and can trigger a margin call if your account value falls too far.
- Mirror Trading
- Mirror trading is an older term, often used interchangeably with copy trading, for automatically replicating a strategy or trader’s trades. Historically it referred to copying a fixed, rule-based strategy rather than an individual trader; today most platforms use “copy trading” for both.
O
- Options
- Options are contracts giving the right, but not the obligation, to buy or sell an asset at a set price by a set date. They can be used for leverage or hedging and carry distinct risks. Some brokers support copying options strategies; whether you can depends on your broker and account permissions.
P
- Paper Trading
- Paper trading is practicing with simulated money and live prices, with no real capital at risk. It is a low-stakes way to learn how a platform or strategy behaves before committing real funds.
- Position Sizing
- Position sizing is deciding how large each trade should be relative to your account and risk. In copy trading, proportional sizing scales a copied trade to your account instead of mirroring a larger account at full size, so a single trade does not take too much of your capital.
R
- Realized vs. Unrealized P&L
- Realized profit and loss is the gain or loss locked in when a position is closed; unrealized P&L is the paper gain or loss on positions still open. Unrealized P&L changes with the market until you close the position and it becomes realized.
- Risk Per Trade
- Risk per trade is the amount or percentage of your account you are willing to lose on a single trade if your stop-loss is hit. Many traders keep this small (often 1% to 2%) so a string of losses does not do serious damage. It drives your position sizing.
- Risk/Reward Ratio
- The risk/reward ratio compares how much you stand to lose on a trade with how much you stand to gain, for example risking $1 to make $2 is a 1:2 ratio. It helps assess whether a trade’s potential payoff justifies its risk.
S
- Sizing Multiplier
- A sizing multiplier scales the size of each copied trade up or down relative to the strategy provider. A multiplier below one reduces your size compared with theirs; this is how you copy a larger account without taking proportionally larger risk.
- Slippage
- Slippage is the difference between the expected price of a trade and the price at which it actually fills, common in fast-moving markets. In copy trading, slippage can make your fill slightly different from the strategy provider’s. Slippage protection can skip a copied order if the price has moved too far.
- SnapTrade
- SnapTrade is a brokerage connectivity provider that lets apps securely connect to your brokerage account. RelayTrades uses SnapTrade so your broker login credentials are never shared with the platform and your funds stay in your own account.
- Spread
- The spread is the difference between the highest price a buyer will pay (bid) and the lowest a seller will accept (ask). It is a cost of trading: wider spreads make each round trip more expensive and can widen slippage.
- Stop-Loss
- A stop-loss is an order that closes a position once it reaches a set adverse price, to cap the loss on a trade. Stops are a core risk-management tool; how a strategy uses them is part of understanding its risk before you copy it.
- Strategy Provider
- A strategy provider (or signal provider, or lead trader) is the trader whose trades you choose to follow. Their trades generate the signals that, with copy trading, are routed to your account. Choosing one carefully, including how they handle losing periods, matters more than chasing a recent hot streak.
T
- Take-Profit
- A take-profit is an order that closes a position once it reaches a set favorable price, locking in a gain. Like stop-losses, take-profit levels are part of a strategy’s rules and behavior.
- Trade Signal
- A trade signal is a notification that a trader has entered or exited a position. On its own, a signal just informs you so you can act manually. Copy trading automates the next step by routing the matching order to your account within your limits.
V
- Volatility
- Volatility is how much and how quickly a price moves. Higher volatility means larger swings in both directions, which raises risk and can increase slippage on copied trades. A strategy’s volatility is part of understanding whether its risk suits you.
W
- Win Rate
- Win rate is the percentage of trades that close at a profit. On its own it can mislead: a strategy can have a high win rate but lose money if its losses are much larger than its wins. Read win rate alongside risk/reward and drawdown.
Y
- YMYL (Your Money or Your Life)
- YMYL is a search-quality concept for topics, like finance and health, that can materially affect a person’s wellbeing. Financial content is held to a high standard of accuracy and trustworthiness, which is why responsible copy-trading content is careful to disclose risk and avoid guarantees.
Put the terms into practice
Copy trade on your own broker with position-size limits, slippage protection, and a kill switch you control at all times.
RelayTrades provides software and automation support, not investment advice or capital management. All trading involves risk; past performance is not indicative of future results.