Is it a good idea to copy a trader when investing?

If your trader has the same goals, same risk profile, the time/inclination to research and decide what to do in a way that supports your mutual goals, backed up with some measurable and reliable level of success then "yes".

If you think these guys fall into that category then it's probably a good bet. However, the chances of that (or even establishing if that's the case) are likely to be close to zero.

Also, I didn't read the details but in general trades are anonymous so you'd have to be limiting yourself to a broker that has a few tame traders willing to share. Even assuming they share accurately or the process is automatic, that further reduces your chances of someone compatible.

A fund will generally be more transparent and less risky, but at the end of the day it's up to you. Seems like more risk than funds or DIY though.

It is a GREAT idea if

1. the guy you are copying is consistently great.
2. if he lets you copy him in a timely manner.

chance of passing check point 1 is 5%

Chance of passing check point 2 is 0%.

So, yes, it is theoretically a good idea... that can never be implemented.

Well, consider it from the other side. Why would a trader be willing to share trades? Consider the following scenario.

1. The reference trader makes a trade in a low volume market.
2. The trade is published so that everyone can see it.
3. Multiple people copy the trade as best they can, but ...
4. The price moves due to the uncommon level of demand.
5. The reference trader closes out the position.
6. The reference trader makes a profit due to the price move caused by the copying.
7. Closing the position is published.
8. Multiple people copy the trade as best they can, but ...
9. The price moves the other direction.
10. Except for a lucky few, most either break even or lose money. Particularly after including trading fees.
11. The reference trader shows a profit, which is published so as to encourage more people to participate the next time.

Note that the reference trader is helped by having people copy the trade, as they become the customers who provide the profit. So this works even if the stock or whatever that is being bought is a turkey. All that is needed is for it to be low volume enough that the people attempting to copy the trade improve the price enough to cover fees and then some.

No, it is not.

Fundamentally because TRADING IS NOT INVESTING. So, you basically do not invest at all, you turn into a trader. As such, it can never be a good investment.

Disclaimer: I trade,

The person you're copying is getting inflated returns because of your actions happening right after his. Additionally, there may be others doing the same mirroring as you. This means that such a successful trader may only be successful because of the people mirroring him from behind (he buys the stock, and immediately other people buy it and it goes up, causing him to profit), and you may be copying someone who is no good at trading. Also, if you are mirroring from behind, and so are other people, you may be buying stocks at inflated prices due to price competition of other people trying to buy it at the same time. When they sell, you are competing with many other mirrored accounts that are also selling at the same time. Both of these things make your buy prices and sell prices unfavorable. In fact, anyone like Jim Cramer who trades stocks and then goes on a tv show to feed other people stock picks is inflating their track record, which paints a distorted picture of their stock-picking talent.

Aside related to investing without expertise:
For an investor who doesn't know anything about trading, it is easier to just buy an index-tracking fund that tracks an index like the S&P 500. It grows at the same rate as the index it is tracking, it doesn't deduct any active management fees like a hedge fund does, and it doesn't require investment skill. Here is an example of how an S&P 500 index has performed (12.0% ROI per year over the last 3 years). Here is an example of how a whole stock market index has performed (14.6% ROI per year over the last 3 years).

Contracts For Difference (CFD) are not investing. They are a form of gambling tarted up with the appearance of investing by the platforms that market them.

It is not a good idea to trade in CFDs. I haven't run any numbers, but you'd probably be better off just gambling at a casino. The house edge is probably lower (if you choose your game wisely).

Since it is not a good idea to trade in CFD's, it is a moot question whether you should copy someone else's gambling choices or not.

It surely can be a good idea if you follow the right trader. The New York Times had this stunning story about a recently deceased secretary for a law firm:

“She was a secretary in an era when they ran their boss’s lives, including their personal investments,” recalled her niece Jane Lockshin. “So when the boss would buy a stock, she would make the purchase for him, and then buy the same stock for herself, but in a smaller amount because she was on a secretary’s salary."

Since Ms. Bloom never talked about this, even to those closest to her, the fact that she had carefully cultivated more than $9 million among three brokerage houses and 11 banks, emerged only at the end of her life.

I think many people would be rich today if they had consistently followed Warren Buffett's investments, even with some time lag. But would you really have the balls to invest massively at the bleakest moment of a financial crisis?

Disclaimer: I didn't watch the video on the site you linked (because that there was a video indicated to me that it was essentially a scam). So this answer is independent of that specific business proposal. The reason is that the specifics don't matter.

Following any trader is generally a bad idea because trading is a bad idea. There were very few traders who could in the past beat the markets over an extended period of time; their advantage may well have been pure luck. Following a trader instead of buying an index fund or investing into a broad portfolio of stock is simply a losing proposition more than 90% of the time. Buy an index fund instead.

If the person knows a lot of money is robotically following them, they can intentionally swerve into small-cap stocks, buying low, allowing the subsequent follower demand to drive up prices, then at this higher price, sell (partly to his own followers). Great for him, not so much for his followers. Congrats, you've legitimized pump-n-dump!

This strategy only works (for the follower) with companies too large for that to have an effect.

So follow your local university's endowment

Since you want to follow someone, call up your local university's giving office. They have an Endowment. They are soliciting funds for it, and donors want to know it's well invested, so they will cheerfully talk about how they invest it.

Endowments are tightly regulated by how they must be invested. There is a legal "Gold Standard" that Endowment managers must stick pretty close to, or they could be judged as being imprudent and face legal consequences (at the least, making up the losses; at worst, jail).

Generally they are after absolute maximum growth in the very long term, with little regard for volatility. In other words their goals align with a young person's IRA.

However, their investment strategy is pretty dull. It will no doubt bore you to tears. If your investment goals include entertainment and a sense of adventure, you'll find none here.

Disclaimer:

• I work (programming) for a company with a business model very similar to eToro. We are basically competitors.
• Opinions are my own and not the views of my employer

As most of the answers have stated, the CFD is a dangerous financial instrument that may not be appropriate for your needs. These risks are inherent to the CFDs, not to the idea of copying an investor, but please take your time to understand the dangers.

Let's assume that you want to use CFDs anyway. What are the consequences of copying a trader?

Cons:

1. You need to pay the trader in some way. If he/she does it for free I would be very suspicious.
2. You need to control the level of risk. Some traders may change their appetite for risk depending on their mood. Some traders may lose money and try to recover their losses. In Darwinex we use some statistics process to unify the level of risk. e-Toro may be doing something similar.
3. You need to find a good trader. How can you detect them? We only have past performance and this is not a guaranty. Traders have incentives to disguise themselves as better. You can check that they really have their skin in the game with real money. Graphs and metrics about the strategy may help. As @Peter A. Schneider said, very few beat the market consistently.
4. You need to replicate the trades fast. We have spent a lot of time working with this computer problem. It can be done but it requires a lot of optimization, coding, and IT infrastructure, and downtime means losing money.
5. Scalability: sometime you may earn money with $2000 but when you try to put $1.000.000 it does not work the same way.
6. Even with a trader that beats the market you can lose money. This happens more that it seems. Trader X gains a lot... people invest. Has a bad moment. People remove money in the worst moment.
7. You do not know why the trader does his/her movements.

Pros:

1. You do not need to spend your nights looking at a screen as someone (hopefully) does it for you. But give it a look from time to time just in case.
2. It is hard to become a good trader. Copying allows traders to work full-time being paid for the hard work. If you do not have enough capital you won't have enough returns (or you will need too much risk) and followers is a way to get this capital
3. Chances are that you and me are not the Warren Buffets of CFDs. Let someone else handle it.

You should read Daniel Kahneman's book, Thinking Fast And Slow or if that's too long (it's worth your time!) then his article. Some choice quotes:

Nevertheless, the evidence from more than 50 years of research is conclusive: for a large majority of fund managers, the selection of stocks is more like rolling dice than like playing poker.

a spreadsheet summarizing the investment outcomes of some 25 anonymous wealth advisers, for eight consecutive years. [...] I computed the correlations between the rankings of advisers in different years [...] While I was prepared to find little year-to-year consistency, I was still surprised to find that the average of the 28 correlations was .01. In other words, zero. The stability that would indicate differences in skill was not to be found. The results resembled what you would expect from a dice-rolling contest, not a game of skill.

Have even few years of personal experience. I can bet (let me know if you want to ;-), you lose at the end.

And I feel there is some pressure to just trade and lose your money (broker is probably often your counterpart).

If even best traders do some gains, it is for a short time and then lost or their account disappear.

Do not think CFD is risky - risky could be your mind - they are sometimes even cheaper to trade than stock exchange (except swap fees), but you should remember how much you hold and have a limit like your available cash or money you would like to invest.

Best you can get here is you will know how to trade what they do wrong, but have no time, money or will to do trade ;-)

It is not a good idea to copy another trader, but it is an excellent idea for other traders to copy you.

If you can get others to copy you, you will get price movements in your favor. For instance, if you buy a small illiquid penny stock and have others copy you, the stock price will rise immediately due to demand and give you a paper gain. Once you get the paper gain, you can sell at a profit to those who are just starting to copy you by buying. In summary, if you have other people copying your trades:

• You get a price increase after you buy
• You get the liquidity needed for selling at the increased price

As a bonus, you could leverage on your profitability by writing books, starting newsletters, and selling courses that "reveal the secrets" behind your "stock trading prowess".

I am not recommending that you follow the plan I showed you above. Instead, use it to understand why you should be careful when trying to copy the moves of another trader.