What is mirror trading?
Mirror trading is legit, and it is not another pyramid scheme. It involves "mirroring" the trades of a successful trader. Since trading information is often available online, traders can use a digital platform to automatically "mirror" and copy the successful trader's orders in real-time. Beginners usually use this strategy as they might not know how to benefit from the markets.
Mirror strategy trading is allowed on any market, making it helpful for every beginner. It was first made available to institutional investors, but it is now available through digital platforms to all investors and traders.
Mirror Trading vs Copy Trading: What's the Difference?
People often use these two terms interchangeably. However, there is a difference between these strategies.
In mirror trading, a trader can decide a lot size and amount of trading positions in each copied trade by himself/herself. While in copy trading, the follower should allocate part of its capital to the signal provider and pay fees and commissions for provided services. Moreover, every trade gets opened according to allocated capital to provider's capital ratio.
For example, suppose a trader allocated $10,000 to a signal provider, who trades with $100,000 capital, and he/she opens a $1000 trade. In that case, this trade will be automatically opened on the trader's copy trade account with a $100 size position due to the 1:10 ratio.
Pros of Mirror Trading
- Easy for beginners. Newbie traders might avoid making mistakes by monitoring and following strategies of pro traders. Traders do not need any experience to use the mirror strategy.
- Ability to learn. By following a professional trader, a newbie might improve his own experience and go through a learning curve until he/she gets good at it without any losses.
- You can leave your emotions out. Mirror trading allows getting rid of emotions, one of the most significant problems for every beginner. A good trader never listens to his emotions while trading. Since mirror trading is automatic and not manual, you don't have to worry about this.
Cons of Mirror Trading
- You need to choose the right trader. If you pick a lousy strategy or trader, you might lose your capital.
- You need to account for time delays. It is important to choose a program that copies the trades right away. If you are trading in the cryptocurrency or forex market in times of market volatility, a slight delay can make your mirror trading strategy worthless.
2022-04-13 • Updated