Copy trading and the latency that eats the edge

[Shadow Trader]

Copy trading platforms let followers replicate the trades of a signal provider automatically. For long-term strategies, small delays barely matter. For scalpers, they can destroy the edge.

If the provider enters at one price and the follower's order arrives half a second later, the fill may be several tenths of a pip worse. Over many trades, the follower's results can fall well below the provider's, even though the trades are the same.

The effect is stronger when many followers copy simultaneously. A burst of orders can move the price against everyone, and the later ones fill at the worst levels.

For anyone considering following a scalper, the sensible check is to compare the provider's reported results with a follower's, if the platform allows it. A large gap suggests that the strategy does not survive execution delay.

For those thinking of becoming providers, the lesson is that a strategy with tiny margins is unlikely to translate well to followers.

Providers sometimes publish their average trade duration and number of trades per day. These two figures give a quick indication of how sensitive the strategy is to delay. Very short durations with many trades are the most vulnerable.

Has anyone compared a provider's results with actual follower results on a short-term strategy?