Signals, robots and copy trading
What a signal service actually sends you
A signal service sends a message. The message names an instrument, a direction, a price to enter, a price to exit and a size. You still place the order in your own account. The provider has no access to your money and no ability to close your position. If the message is wrong, the loss sits in your account and the provider keeps the monthly fee.
The size in the message is not your size. A provider may write 0.20 lots on USD/ZAR. That is the size for a model account, not for yours. At 18.4100, 0.20 lots is about R3.682 per pip. An 80 pip loss is R294.56. That is before the monthly fee. If the fee is R450, the month starts R450 down before any trade.
You can change the size to fit your account. If you halve it to 0.10 lots, the pip value halves to about R1.841. The same 80 pip loss becomes R147.28. The fee does not halve. The fee is fixed. This is the part most beginners miss: the fee is certain, the trade result is not.
What a trading robot does with your money
A robot is software that places orders for you. You install it, connect it to your account and give it permission to trade. It follows rules written by someone else. Those rules may be simple or complex. You cannot see the reasoning behind a live order. The robot does not know your rent is due.
A robot has a purchase price and a running cost. The purchase price is once-off, such as R1 200. The running cost may be a subscription, a profit share or nothing. The robot also trades a size. If it trades 0.10 lots on USD/ZAR at 18.4100, the pip value is about R1.841. A 60 pip gain is R110.46. After the R1 200 purchase price, the net is -R1 089.54.
That example is not unusual. A robot must make many pips just to cover its own cost. The cost is paid whether the robot wins or loses. If the robot loses, you lose twice: the trade loss and the purchase price. The seller does not refund the purchase price because the market moved against the rules.
What copy trading copies, and what it does not
Copy trading links your account to another person's account. When they open a trade, your account opens the same trade. The size is copied as a proportion. If they trade 1.00 lot and you copy at 10%, your account trades 0.10 lots. The decision is theirs. The money is yours.
The copied trader may use a size you would never choose. At 18.4100, 1.00 lot is about R18.41 per pip. A 50 pip move in your favour is R920.50. The platform takes 20% of profit, which is R184.10. You keep R736.40. That sounds fine until the same size moves against you. A 50 pip loss is R920.50 out of your account, and the platform takes no share of a loss.
Copy trading also copies the other person's risk controls, or their absence. If they do not use a stop loss, your account has no stop loss either. You can usually set a maximum size or stop copying, but you cannot change the trade once it is open. The copied trader keeps trading while your account carries the result.
Three ways to trade someone else's decision, and the rand cost of each
| Step | Amount | Note |
|---|---|---|
| Signal service | R450 per month | A typical subscription fee quoted by signal providers; the amount varies between providers. |
| Signal trade on USD/ZAR | R1 841 profit or loss | One standard lot on USD/ZAR at 18.4100 moves about R18.41 per pip. A 100 pip move is 100 x R18.41 = R1 841. |
| Trading robot | R1 200 once-off | A common one-time purchase price for an automated strategy; prices vary widely. |
| Robot trade on USD/ZAR | R920.50 profit or loss | 0.50 lots at 18.4100 is about R9.205 per pip. A 100 pip move is 100 x R9.205 = R920.50. |
| Copy trading | R300 per month plus 20% of profit | A performance fee structure some platforms use; terms vary between platforms. |
| Copied trade on USD/ZAR | R3 682 profit or loss | 2.00 lots at 18.4100 is about R36.82 per pip. A 100 pip move is 100 x R36.82 = R3 682. |
| Total cost before any trade | R1 950 | R450 + R1 200 + R300 = R1 950 across all three routes in one month. |
The broker may round pip values, add spreads, commission or overnight swap charges on top. These figures are examples, not quotes. Your own broker's numbers will differ.
Doing it once, step by step
Before you pay for a signal, a robot or a copy link, work through these steps in order. They show what the service costs and what a normal loss does to your account.
- 01
Write down the fixed cost first
List every amount you pay before a single trade: monthly fee, once-off price, subscription, profit share. For a signal service at R450 per month, that is R450. For a robot at R1 200 once-off, that is R1 200. Add them up. This is the amount you must recover before you are level.
- 02
Find the pip value at the copied size
Use the size that will actually be traded, not the size in the advert. On USD/ZAR at 18.4100, 0.10 lots is about R1.841 per pip. 0.20 lots is about R3.682. 1.00 lot is about R18.41. Write your number down.
- 03
Calculate a 100 pip loss at that size
Multiply the pip value by 100. At 0.10 lots, 100 pips is about R184.10. At 0.20 lots, it is about R368.20. At 1.00 lot, it is about R1 841. This is the loss if the trade goes 100 pips against you. It can go further.
- 04
Add the fixed cost to that loss
Take the 100 pip loss and add the fixed cost from step one. For a signal service at R450 and 0.20 lots, the total is about R368.20 + R450 = R818.20. For a robot at R1 200 and 0.10 lots, it is about R184.10 + R1 200 = R1 384.10. This is what one bad trade plus the fee costs you.
- 05
Check the provider against the FSCA
The Financial Sector Conduct Authority (FSCA) is the South African regulator. Check whether the provider appears on the FSCA register. A provider that is not registered gives you no regulatory route if something goes wrong. Registration does not make a strategy profitable. It only tells you who is accountable.
- 06
Decide if you can afford that total twice
Take the total from step four and double it. If that amount would damage your account or your month, the size is too big or the service is too expensive. Reduce the size or do not pay. The market does not care which service you chose.
The mistake most people make here
The common mistake is thinking that paying someone else moves the risk to them. It does not. A signal provider, a robot seller and a copied trader all keep their fee whether your account grows or shrinks. The loss on the trade still lands in your account, and with copy trading the position size is often larger than a beginner would choose alone. Before paying for any of these, work out the rand loss on a 100 pip move at the size that will actually be copied, and check that the provider is registered with the FSCA. If you cannot afford that loss twice over, the size is too big.Check yourself
A signal service charges R450 per month. You follow one trade on USD/ZAR at 18.4100 with 0.20 lots and it moves 80 pips against you. What is your loss, and what is the total cost including the fee?
0.20 lots at 18.4100 is about R3.682 per pip. 80 pips x R3.682 = R294.56 loss. Add the R450 fee: R294.56 + R450 = R744.56 total cost.
A robot costs R1 200 once-off and trades 0.10 lots on USD/ZAR at 18.4100. It makes 60 pips. What is the net result after the purchase price?
0.10 lots at 18.4100 is about R1.841 per pip. 60 pips x R1.841 = R110.46 profit. Net after the R1 200 cost: R110.46 - R1 200 = -R1 089.54, a loss.
Copy trading copies a trader using 1.00 lot on USD/ZAR at 18.4100. The trade moves 50 pips in your favour. The platform takes 20% of profit. What do you keep before other costs?
1.00 lot at 18.4100 is about R18.41 per pip. 50 pips x R18.41 = R920.50 profit. The platform takes 20%: R920.50 x 0.20 = R184.10. You keep R920.50 - R184.10 = R736.40.
Questions that come up next
If I pay for signals, who is legally responsible when a trade loses?
You are. The signal provider only sends a message; you place the order in your own account. The provider never holds your money or your position. The loss lands in your account and the fee stays paid. The FSCA may require the provider to be registered, but that does not move the loss to them.
Can I change the size a signal or robot uses?
With signals, yes. You decide the lots you enter, so you can halve or double the suggested size. With a robot, sometimes. Some robots let you set a size multiplier; others do not. With copy trading, you usually set a proportion, such as 10% of the copied trader's size. Whatever you choose, the loss is still yours.
What does a 0.01 lot on USD/ZAR cost per pip?
At 18.4100, 0.01 lot is about R0.184 per pip. A 100 pip move is about R18.41. That is the smallest size most brokers allow. It is a useful size for learning because the rand amounts stay small.
Do these services work with a South African broker?
Some do and some do not. It varies. A signal service may work with any broker because you place the order yourself. A robot must be compatible with your broker's platform. Copy trading is usually built into one broker's platform, so you may need an account with that broker. Check the FSCA register before paying anyone.
What is the cheapest way to try one of these?
Use a demo account first. A demo account uses virtual money, so a loss costs nothing. You can see how often signals arrive, how a robot behaves and how copy trading sizes positions. Then, if you go live, start with the smallest size your broker allows. Never pay a large fee before you have seen the service work on demo.
How do I pay for these services from South Africa?
Most providers accept EFT, instant EFT or bank cards. Some accept only one of these. Check before you sign up. The payment method does not change the risk. The fee leaves your account whether the service makes money or not.
The words used on this page
- lot
- A standard unit of trade size. On USD/ZAR, 1.00 lot is about R18.41 per pip at 18.4100. Smaller sizes are written as 0.10 or 0.01 lot.
- pip
- The smallest common price move on a currency pair. For USD/ZAR, one pip is 0.0001. If the price moves from 18.4100 to 18.4101, that is one pip.
- signal service
- A paid service that sends trade ideas by message. It names the instrument, direction, entry, exit and size. You place the order yourself, so the loss stays in your account.
- trading robot
- Software that places orders on your account using rules written by someone else. It has a purchase price and sometimes a running cost. The seller does not refund the price if the robot loses.
- copy trading
- A link between your account and another person's account. When they trade, your account copies the trade at a proportion you set. The decision is theirs; the money is yours.
- FSCA
- The Financial Sector Conduct Authority. It is the South African regulator for financial services. You can check whether a provider is registered before you pay them.
What to take away
- Paying someone else does not move the risk. The fee is certain; the trade result is not.
- Work out the rand loss on a 100 pip move at the size that will actually be copied, then check you can afford that loss twice over.
- A robot must make many pips just to cover its own purchase price before it makes anything for you.
- Copy trading often copies a size larger than a beginner would choose alone.