Entering the world of options trading can be thrilling, but many beginners make costly missteps in their early days. Copy trading offers a safety net by allowing newcomers to mirror the trades of experienced traders. Below, we examine five common mistakes beginners make, and how copy trading helps you avoid them.
What Beginners Usually Get Wrong in Options Trading
Many newcomers dive into options trading without fully understanding what they’re risking. Common errors include misjudging volatility, ignoring time decay, and using overly complex strategies. Without a solid foundation, even a well-intended trade can quickly turn into a loss.
When you copy a seasoned trader, you’re effectively letting their experience guide your choices—at least until your own understanding catches up. This helps reduce the chance of entering trades that are poorly structured or overly risky.
Chasing Low-Cost, High-Risk Trades: Why It Backfires
Beginners are often attracted to cheap options contracts (low premium) because they appear inexpensive and promising. Yet, these “cheap” options are frequently high risk and may expire worthless due to time decay or unimpressive movements in the underlying asset.
Copy trading steers you away from that trap. The experienced traders you follow are more likely to select trades based on proper risk–reward analysis, avoiding high-risk gets that appeal only because they cost little up front.
Ignoring Volatility and Time Decay Before Entering Trades
Volatility and time decay (theta) are critical in options pricing. Beginners may enter trades with no regard for whether implied volatility is high or low, or how quickly time decay will erode their gains.
With copy trading, the strategies being copied already account for those factors. You benefit from someone else having done the analysis—so your trades are less exposed to surprises from volatility swings or time decay erosion.
Taking Too Much Risk: Overleveraging & Poor Position Sizes
One of the fastest ways to lose is by taking on excessive risk in each trade—using too large position sizes relative to your account. Overleveraging amplifies losses and can lead to catastrophic drawdowns.
Copy trading platforms often allow you to set risk controls—such as maximum capital per trade or drawdown limits—so even while copying, you maintain control over how much exposure you take in your own account.
Lack of a Clear Plan & Exits: Holding Losers Too Long
Many beginners don’t define exit criteria in advance. When a trade goes against them, they hesitate or hope it will recover, resulting in deeper losses. Copy trading removes much of that indecision: the trades you mirror include predefined entries, exits, stop losses, and profit targets, so your decisions are not left to emotional guesswork.
Built-in Risk Controls: How Copying Helps Limit Losses
One of the most valuable benefits of copy trading is that many platforms provide built-in safeguards. These controls can include:
- Portfolio stop limits: A maximum drawdown percentage, after which copying is paused.
- Trade caps or allocation limits: Ensuring you don’t allocate more than a set percentage of your account to a single copied trade or trader.
- Automatic stop-loss enforcement: Even if the trader you’re copying doesn’t set stops, your copy settings can enforce them.
These measures help prevent runaway losses caused by sudden market moves or poor decisions from the source trader.
Avoiding Emotional Decisions by Copying Disciplined Traders
Beginners often fall prey to emotional pitfalls—fear, greed, FOMO—and make rash moves. By copying traders who already have discipline embedded into their trading style, you inherit:
- Rules for entries and exits
- Strict risk tolerance boundaries
- A systematic approach to scaling in or out
As a result, your decisions are less reactive and more aligned with a stable trading framework.
Learning While Copying: Gaining Insights without Costly Errors
Copying does more than replicate trades—it educates. As you observe the patterns of expert traders:
- You begin to understand the logic behind entry and exit points
- You can backtrack and review why certain trades were closed
- You gradually build your own instincts by seeing strategies in action
This kind of practical, live learning helps reduce mistakes that beginners often make when trading alone.
Choosing Reliable Traders to Copy: What to Look For
Not all traders are equal. To avoid being copied into risky strategies, check for:
- Consistent track record: Avoid traders with wild swings or short histories
- Drawdown history: A trader who tolerates large drawdowns may endanger your capital
- Strategy alignment: Their style (e.g., aggressive, conservative) should match your risk appetite
- Transparency: Look for traders who explain their reasoning and tactics
Doing your due diligence helps you avoid copying someone whose approach might lead to expensive errors.
Diversifying Your Copy Trading: Don’t Put All Eggs in One Basket
Even expert traders can have bad stretches. To reduce your exposure:
- Copy multiple traders with different strategies (e.g. trend, mean reversion)
- Allocate capital in portions, not all into a single copied account
- Rotate or replace underperforming traders rather than letting losses accumulate
Diversification spreads risk and prevents a single bad strategy from wiping out your gains.
Suggested Article: How OptionTurtle Can Help You Transition from Losing to Profitable Trader
Conclusion
Copy trading can act as a protective scaffold while you grow in options trading. By mirroring experienced traders, you reduce exposure to common mistakes—like chasing cheap options, misjudging volatility, overleveraging, or lacking exit discipline. Over time, you’ll gain experience, build your own strategies, and use the lessons you observe to trade more independently.If you’d like to explore how copy trading can help you avoid costly mistakes and build confidence, visit TradeBoticks.
