Copy trading and PAMM accounts

A leaderboard shows a trader up 140% this year. You press “Copy” with $5,000. Before the first trade opens, count how many people are now earning from that click.

How the money moves

In copy trading, your own account at a broker automatically opens the same trades as a provider, scaled to your balance. Your money stays in your account and you can stop copying at any time.

In a PAMM account (percentage allocation management module), your money joins a pool that one manager trades. Profits and losses are shared by each investor’s percentage of the pool. You usually cannot see or close individual trades, and withdrawals may be allowed only on set dates.

In both, a regulated set-up keeps the manager away from your money: they can trade it, not withdraw it. Offers where you send money to a person who “manages” it for you work differently; see “Account management” and profit-sharing offers.

Typical fees, which may be stacked:

• Performance fee: often 20–30% of new profit, usually above a high-water mark (the account’s previous peak, so you do not pay twice for the same gain).
• Subscription: a flat monthly charge, paid in losing months too.
• Spread mark-up or commission: extra cost on every copied trade, win or lose.
• Volume rebates: some providers are paid per lot their followers trade, which rewards trading often.

The provider’s risk is not your risk

Your copy is a different account. With a 0.01-lot minimum, a provider’s 0.02-lot trade scaled to 0.005 lots rounds up to 0.01, double the intended size. You join on a different date, often after a good run, so the drawdown that follows is yours and the gains before it are not. And a provider who adds money or opens a second account to recover a loss does not change your balance.

Try it

Risk per trade: Win rate: Reward-to-risk:

Run 100 trades again

Final balance

Worst drawdown

Longest losing streak

Each run uses the same settings with different luck. Run it several times: the shape changes, the drawdowns don't go away.

This method has no edge: 50% wins at 1:1 is an expectancy of zero before costs. Press “Run 100 trades again” ten times and note the best final balance. Now picture 5,000 accounts running it and a leaderboard showing the top ten.

That is survivorship bias: accounts that blew up drop off the list, so the ones still visible look like skill. A big return on a leaderboard shows only that the account has survived so far.

Reading a track record

• Length: a year or more, across calm and volatile markets. Three months says very little.
• Number of trades: hundreds, not dozens. See Testing a strategy for why.
• Maximum drawdown: as a percentage and in months. Ask whether you could sit through it with your own money.
• Consistency: returns spread across many months rather than one lucky one, and position sizes that stay steady after losses. Sizes that grow after losses are a warning sign covered in Red flags in “guaranteed” robots.
• Source: a record taken from the broker’s own account data, not a screenshot.

Past results, even verified ones, do not promise future results. Copying uses your money, so the losses are yours too.

Quick check

Quick check

1. Question 1 of 4

   In copy trading through a regulated broker, what can the provider do with your money?

   ATrade it through your copy, but not withdraw itBWithdraw it to pay their performance fee whenever they likeCNothing; copied trades are simulated

Go deeper: Why Most Retail Traders Lose Money · Drawdown in Trading: What It Is and How to Recover From It