Is Copy Trading Illegal? Or, Is It Legal?
A common question people have about copy trading is whether it is illegal or, in fact, legal. Can you do copy trading without running into any legal problems? What if you are living in a country outside the USA?
Copy trading is not illegal. It is legal in most countries if you use a regulated broker (USA, Turkey, and Belgium). In Malaysia, copy trading is illegal. If you are trading in the forex or crypto markets, make sure forex or crypto trading is legal in your country, even for retail investors.
In this article, you will learn more about the legality of copy trading. We will also discuss why copy trading is a good, legitimate, and legal way to earn money in most countries, provided you do it right. Let’s get into it.
Table of Contents.
Is Copy Trading Legal?
In most countries, copy trading is legal. However, since it depends on your local laws, you have to research your country’s laws and regulations about copy trading. For example, in countries like the USA, copy trading is undoubtedly legal and doesn’t pose many issues.
However, copy trading quickly exits "legal" territory if your broker isn’t regulated. Make sure you’re using a regulated broker that follows all local laws. That will also help protect your investment and make sure you don’t lose your money (an effect of dealing with dishonest brokers and dealers).
Forex Trading.
You also have to make sure that the type of trading you are doing is legal. Forex trading, for copy trade crypto example, is legal in most countries. In the United States, it’s only legal if your broker has a US license. In other words, it is illegal to use a broker in the USA who has a license from another country.
Also, some countries put restrictions on forex trading or even ban them entirely. For example, in India, there are roadblocks you’ll have to clear. You will have to use a broker that is regulated locally; you cannot use an international broker.
Forex trading is legal in Turkey, but brokers have to undergo an extensive process to get authorization. So, use a broker who has gone through that process and operates legally. Otherwise, they might be shut down by the government!
Also, in Malaysia, forex trading with others’ funds is prohibited, and you are only allowed to trade currencies with licensed institutions.
A better example of where you cannot do forex trading is Belgium. While forex trading itself is not banned there, you have to be a professional trader to trade forex in the country. That means that if you are a retail investor, forex trading is off the table.
Cryptocurrency Trading.
That’s all about forex. However, when it comes to cryptocurrency trading, there are other restrictions you might face. For example, it is well known that Nigeria cracked down on cryptocurrency and introduced several rules for those buying or copy trade crypto reddit selling crypto.
In a nutshell: While copy trading is legal in most countries, it is important to check your country’s local laws beforehand. Make sure that you are using a broker who is regulated and approved in your country and that your chosen trading method is 100% legal.
Is Copy Trading Legal in the UK?
Copy trading is still legal in the UK, but confusion about this stems from the UK’s financial regulator’s statement. They simply said that companies offering copy trading services would have to seek permission to operate as investment managers. Since they effectively manage your money, they should be considered investment managers, according to the regulator.
However, that makes things safer for you and your investment in the long run. Even though the companies are not actively making decisions about what to do with your money, as the trader you’re copying does that, the FCA still considers them investment managers.
However, copy trading will still be legal in the UK, with the only difference being that your money is likely safer now!
Does This Constitute Legal Advice?
It is your job to contact a lawyer or research local laws in your country. We cannot take responsibility for anything you do in your country, and since we are not lawyers, what we write here is not legal advice. However, we can say that copy trading is a great way to make money, and many have gotten rich with it.
Is Copy Trading a Scam?
Copy trading is not at all a scam. Copy trading is legal because it is a legitimate way to make money by copying a successful trader’s trades to make money yourself. There’s not much more to copy trading than that.
Is Copy Trading Halal?
Trading, including forex trading, is not haram, as long as certain requirements are met. Some brokers will offer an Islamic account for halal trades. For example, eToro has an entire blog post about why their eToro Islamic Account is not haram. One thing that stands out is that there is no interest in contracts lasting over 24 hours, and eToro does not take additional rollover commissions on such trades. Contact your broker for more information.
How Soon Can I Make Money With Copy Trading?
Copy trading allows you to earn money very quickly.
All you have to do is fund your account (after opening it and getting it approved), and you can start earning money. Of course, you will have to choose a trader to copy first. You can withdraw your money whenever you want, but I would recommend leaving your money in your account for the long run. This way, you can make more money to increase your account balance via compound interest continuously.
Copy trading doesn’t require you to have any prior experience. You don’t need to go through a learning curve to learn how to make money with copy trading, and you don’t have to worry about making beginner mistakes that cost you big.
However, copy trading is not a get rich quick scheme. You have to stay in copy trading long term if you want to make a nice amount of money. Although you can start making money right away, be aware that those who make the most money with copy trading are people who stick with copy trading for the long term.
If you think that copy trading is a get rich quick scheme, you are more likely to quit as soon as you see some downs. All traders can see ups and downs. It does not matter how experienced or good they are; that is the nature of trading. If you think that copy trading is something that will make you rich overnight, you will flee as soon as you see some bad news. Don’t do that. Instead, you should stick with copy trading for the long term.
I would also caution against putting all your eggs in one basket. Copy trading is good, but solid investment advice is always to split up your money and keep some of your investments in cash or in a retirement account. Stocks that have low risk are good as well, as they have less volatility.
Conclusion.
Copy trading is legal, though always use a regulated broker and make sure you know all local laws relating to copy trading. It is excellent for beginners, as you can start making money right away with a small investment and without any prior experience.
Copy trading is not inherently haram either, as it can be halal if certain conditions are met, and some brokers offer halal accounts. I recommend that all new traders get started with copy trading.
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