More people than ever before are waking up to the profit potential in the Forex market – and a lot of them are looking for ways to jump on board this investment vehicle without having to spend a lot of time in the starting blocks.That explains why the popularity of “copy trading” (sometimes called social trading or mirror trading) has exploded in the Forex community lately. But is copy trading actually legal?
Forex copy trading is completely legal. It is however extremely risky and you need to completely research the trader you are copying before engaging in trade copying. Copy trading or social trading will potentially count as financial advise, which could have legal implications on the trade provider.
Is Forex Copy Trading Illegal?
Right out of the gate you want to be sure that you are maximizing your profit potential with Forex investing – but you also want to be sure that you aren’t doing anything illegal, anything that’s going to get you in hot water with the SEC, or anything that’s going to have you spend time behind bars.
Will “copy trading” get you in trouble? Is it illegal? Or is it totally legitimate?
Well, we can tell you – beyond a shadow of a doubt – that copy trading is 100% legal, 100% legitimate, and an effective way to hit the ground running in the Forex world in the overwhelming majority of countries around the planet (including the United States).
Sure, there are a handful of countries that have explicitly outlawed this kind of trading. But there is no real mechanism for determining whether or not these trades are executed through copy trading, and enforcement is a little bit spotty.
At the same time, we can tell you that this kind of trading becomes illegal as soon as you stop outside of the regulated brokerage industry.
If your broker isn’t on the up and up, isn’t fully regulated, and may not be following all of the rules that govern Forex investing in your country you may very well be breaking the law without even realizing it!
This is a big piece of the puzzle behind why it’s so important to only ever work with totally legit Forex brokers. One of the most popular social trading platforms and a platform I have personally used before is eToro – so it maybe worth checking them out!
Is Forex Copy Trading a Scam?
Now that we have covered the legality of copy trading, it’s time to dig a little bit deeper into whether or not proponents of copy trading are scam artists, snake oil salesman, and less than ethical paddlers of a phony moneymaking method – or the real deal!
Copy trading is a totally legitimate way to make money in the Forex world, especially if you are following – or copying – the trades that have been executed by someone with a successful track record that’s doing the heavy lifting of research and charts tracking for you.
You’re basically piggybacking off of the time, energy, and wisdom that they have invested into the market and sort of “painting by numbers” by executing the same kinds of trades that they are at the same time.
Can that be a little risky? You bet! Like we said a moment ago, you’re basically just following the leader when it comes to copy trading in Forex.
Pick the right person and the right trades and you can make a pile of money in a hurry without a whole lot of experience in Forex (or even any experience in Forex, for that matter).
Pick the wrong person with your copy trades, though, and you could end up in the poorhouse faster than you ever thought possible – blowing up your immediate financial future along the way. This isn’t something that you want to wing. There are actually a huge amount of options for copy trading, both in terms of platforms to use and traders to use too.
You’ll want to vet, you’ll want to research, and you’ll certainly want to back trade as much as possible to be sure that the copy trading you are doing is built on the back of rock solid principles and all available intel. I’d be looking for a third party verified track record too, like MyFxBook.
Does Forex Copy Trading Count as Financial Advice?
There’s a fine line between whether or not Forex copy trading counts as financial advice, and a lot of it has to do with how you get linked up with copy trading in the first place.
If you decide, of your own volition, to follow and copy trade someone in the Forex space – without them even knowing that you are – it would be impossible to say that what they were doing constitutes financial advice.
At the same time, if someone was providing a service offering copy trading explicitly – and especially if they were promising some sort of results – this arrangement could certainly be construed as receiving financial advice from someone else.
For a lot of reasons (not the least of which is almost unlimited liability issues) the overwhelming majority of people that show their trades in the Forex world and make them available for social trading or to be copied aren’t going to offer them as a service and aren’t going to promise any results, either.
They merely offer “social trading” for those that are interested in the strategy or methodology they are using and they make absolutely no guarantee of anything whatsoever if you decide to follow along.
The good news here is that there are a lot of free, open, and pretty profitable traders in the Forex world today that allow newbies and veterans alike to copy trade alongside them.
The bad news, though, is that you are going to have to do a lot of heavy lifting on your end to vet these people, to back test their strategies, and to follow along with the same intelligence they are using to inform these decisions to decide if they are right for you.
As we highlighted a moment ago, copy trading is not a “set it and forget it” pathway to wealth in the world of Forex.
You have to be engaged, you have to be deliberate, and you have have at least a fundamental understanding of the kinds of trades you are executing (and their upside/downside) or you are going to have a very bumpy ride.
Keep the things we highlighted above in mind, though, and you should be good to go with copy trading!
In Summary – Is Forex Copy Trading Actually Legal?
In conclusion, we think it is fair to say that actually yes, forex copy trading and social trading is technically legal. We would like advise you to use a huge amount of due diligence and risk management when it comes to this industry as there are many scams and a huge amount of potential losses to be made.
Likewise, it can be a great way to earn a few extra percent on your portfolio each year. Learning to trade forex yourself will always be a better option in the long run!
You should also remember that the financial markets are very risky and it is not for everyone so please do your own research, test your strategies and keep learning about Forex trading before risking real money.