What is a worked example of Copy Risk?
Copy risk is the difference between (1) what you believe you are copying and (2) what actually gets copied and executed for you. The “worked example” below uses one simple scenario to show how outcomes can diverge even if the other trader’s decisions are copied.
The key point is not prediction. It is accounting: copied results depend on mapping rules, position sizing, timing, and costs. If any of these differ from your assumptions, your realized outcome can differ.
How the mechanism works
Start with stable mechanics (conceptual rules that do not depend on market direction):
- Trade direction and signal source: A provider opens/closes positions based on their plan.
- Copy mapping: The copy system translates the provider’s actions into your account actions (for example, using a ratio, a fixed lot size, or an equity-based rule).
- Execution details: Even if the provider and your platform show the “same” trade, the orders may fill at different prices, or be partially filled.
- Costs and constraints: Trading spreads, commission/fees, and platform settings change your net results. Constraints (minimum size, margin limits, leverage caps) can also block or reduce copies.
Copy risk is the combined effect of these differences.
Evidence or worked example (with explicit assumptions)
Assume a copying system uses a fixed proportion: your copied position size is set to be exactly 0.50× the provider’s position size at the time copying occurs.
Assumptions (state up front)
- Provider opens 1.00 lot of a currency pair.
- You open 0.50 lot due to the 0.50× rule.
- The market moves so that the provider’s position results in a +100 price-profit unit on their 1.00 lot.
- Your position would therefore scale to +50 price-profit unit if execution prices and costs were identical.
- Your platform has extra costs that the provider’s chart does not fully reflect in the same way (e.g., different netting of spreads/fees), modeled here as a -10 price-profit unit cost impact.
- There is one timing/price mismatch modeled here as an additional -5 price-profit unit from execution differences.
Calculation
- “Scaled gross” outcome: +100 × 0.50 = +50
- Costs: +50 + (-10) = +40
- Execution mismatch: +40 + (-5) = +35
What this demonstrates
Even with a clean 0.50× mapping, your net outcome (+35) differs from the “ideal scaled” outcome (+50) due to variable details you may not see in the provider’s performance view.
In a downside case, the same mechanics work in reverse: any cost or execution mismatch reduces how closely your result matches the scaled provider result.
Limitations and risks (material failure modes)
Copy risk is real uncertainty, not a single number. Common limitations include:
- Different fills and timing: Your orders may execute at different prices than the provider’s displayed fills.
- Partial copies and constraints: If margin, minimum order sizes, or platform limits interfere, copying can be reduced or skipped.
- Cost model differences: Net profit shown to you can diverge from the provider’s displayed performance because spreads/commissions are applied differently.
- Historical similarity is not a guarantee: Even if a previous provider match looked close, future matching depends on market conditions and operational behavior at each moment.
Verification or next question
To independently verify copy risk for any scenario you examine, focus on the copying rules and operational behavior, not on marketing claims. The most useful checks are:
- Does the platform document how it maps position size (ratio, equity-based sizing, rounding rules)?
- How are execution and order mapping handled (partial fills, delays, slippage handling)?
- What are the net cost components you will pay (commissions, spreads treatment, financing if applicable)?
- Are there constraints that can block copying during margin stress?
If you want, share the exact copy sizing rule and any stated fee/cost assumptions from a specific platform’s documentation, and you can test a new worked scenario using the same step-by-step accounting approach—without relying on predicted outcomes.