Copy trading
Slippage and latency in copy trading
Copy-trading slippage is the difference between a reference price and the follower’s execution price. Latency is the delay between relevant observations and execution. Both can change returns, especially in fast markets, thin books and strategies that depend on small price advantages.
Define the reference before measuring slippage
A comparison can use the leader’s fill, the market price when the engine observed it, or the quote when the follower order was prepared. Those baselines answer different questions. Comparing against the leader combines price movement during delay with the follower’s own execution impact. Comparing against a fresh quote focuses more directly on execution after the decision.
Record whether prices are volume-weighted across fills. A follower order executed in pieces can have a different average price from its first fill. Use the whole executed quantity when assessing its cost.
Depth and order size matter
An order book contains limited quantity at each price. A larger aggressive order may consume several levels. Many followers responding to the same leader can compete for the same liquidity. A market with an attractive last price can still have a wide spread or shallow depth at the moment an order arrives.
Hypothetical example: a $10,000 trade with a 0.2% unfavorable price difference has about $20 of slippage relative to the chosen reference, before fees. Repeated entry and exit costs can overwhelm a strategy whose typical gross gain is small.
A limit can reject a trade rather than reproduce it
A slippage guard constrains accepted execution conditions. It does not guarantee the order fills. If price moves outside the allowed range, execution may be partial, delayed or skipped under the engine’s rules. A follower protected from an unfavorable entry can therefore miss a profitable leader trade as well.
Increasing a tolerance trades some price protection for a greater chance of execution. That is a risk choice, not a universal improvement. Read current control descriptions and confirmed execution events rather than assuming an order filled because a leader traded.
Evaluate strategy sensitivity
Short holding periods and frequent turnover tend to make execution costs more important relative to each trade’s intended gain. Longer holding periods still face entry, exit and stressed-market risk. Review the leader’s typical trade size and duration alongside your allocation. For meaningful measurement, keep reference price, observed time, order time, average fill price and skipped-order reasons together.
- Measure with a defined price baseline.
- Review spread and book depth.
- Include entry and exit costs.
- Treat missed trades as part of follower divergence.