WHAT IS COPY-TRADING and HOW IT WORKS?
Copy trading is an automated investment method where you link your account to an expert trader so that your account automatically mirrors their moves in real-time.
How it works:
Trades Mirrored: When the expert trader buys or sells, your account does the exact same thing.
Proportionality: If the expert trader invests a % of his own funds, your account will invest a proportional % of whatever amount you have invested.
Example: Lets assume you have invested $2,000 in copy-trading with expert-trader, whereas the expert-trader has his own personal investment of $1,000. If the expert trader invests $50 out of of $1,000 (that is 5%), then your account will invest $100 out of $2000 (that is 5%). Accordingly, if expert trader gains $10 profit, then your account will earn $20 profit.
Expert Trader Fee: The expert trader charges a performance fee as a profit sharing ratio for using his service of trading mirrored proportionally into your account to gain profits. The expert trader, being only a worker and service provider is entitled to his fee if the copier earns any profits. In case, there is no profit or if there is a loss then the expert trader does not receive any fees.
Independent Accounts: the expert trader account and copier account are independent of each other, and neither of the two have access to other’s account. The copier account only mirrors trades of the expert trader without giving any access of his account.
Benefits:
Hands-off: You don't need to study charts or make manual decisions or do any trading yourself.
Beginner-friendly: You can profit from the skills of professional expert trader even with zero experience.
COPY-TRADING ARRANGEMENT is a MUDARABA CONTRACT
The copy-trading arrangement at any broker in the entire trading industry, between the expert trader (as service provider) and Copier (Investor), adheres to the principal of MUDARABA CONTRACT defined in Islamic Finance Arrangement as described in diagram below:
