What Is Mirror Trading? Here’s What You Should Know

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If you’re new to trading, you might be considered starting your trading journey with mirror trading. Many novice traders rely on mirror trading as a way of minimising their risk level when they’re starting out. But what is mirror trading and is it a good way to get started as a beginner?

In this article, I’ll explain the pros and cons of mirror trading, along with the differences between mirror trading and copy trading, so that you can make an informed decision about the right type of trading for you.

Is Mirror Trading An Effective Way To Earn Money?

Mirror trading is a popular way to get started with trading as a beginner. However, as well as having many benefits, this method of trading also has a few drawbacks.

But what you really want to know is whether mirror trading is an effective way to earn money as a beginner trader. Unfortunately, there’s no simple answer to that question. How successful you are with mirror trading will really depend on the trading algorithm that you follow.

Read on to learn everything you need to know about mirror trading.

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Definition Of Mirror Trading

As the name suggests, mirror trading involves mirroring the trading strategy of other more established and experienced traders. Although mirror trading can be done in both stock and forex markets, it is most commonly used in forex markets.

Mirror trading platforms operate by combining the strategies of their top traders to create a trading algorithm. This algorithm will send signals to your trading account, telling it what trades to make in almost real time.

It’s important to note that when you use mirror trading, you have to copy everything that the algorithm suggests – there is no option to pick and choose which trades you perform.

Mirror trading typically requires a large upfront capital investment. This is due to the high levels of fluctuation in mirror trading accounts as a result of the large volume of trades being performed. If you decide to give mirror trading a go, you’ll need to keep a close eye on your account to ensure that you have sufficient funds available at all times.

Benefits of mirror trading - What is mirror trading

Benefits Of Mirror Trading

Here are some of the benefits of mirror trading, to help you to decide whether mirror trading is right for you.

Reduced Emotions

As trading decisions are made for you in mirror trading, there’s no risk of making a rash decision that you may later regret. This can help to reduce the stress of trading, as it makes trading a relatively hands-off process. You can simply check the performance of your mirror trading account on a weekly basis and decide whether you want to continue following the algorithm. If you are someone who acts based on your emotions, mirror trading may be ideal for you.

Low Level Of Time Commitment

As mirror trading is completely automated, it doesn’t demand a high level of commitment when it comes to time. This means that you don’t have to commit to studying graphs or watching screens all day to get involved in trading.

Based On Multiple Traders

Mirror trading is based on combined trader algorithms. This mean that your trading decisions are based on the trading actions of multiple traders, potentially lowering your risk.

Verified Results

Reliable mirror trading platforms will typically examine, test and validate strategies before they are uploaded to the platform. They will often have to prove a track record before being accepted to the platform. This helps to filter out losing trades, increasing the reliability of algorithms.

Learn about the top 3 copy trading services here

Disadvantages Of Mirror Trading

Whilst there are many benefits of mirror trading, there are also several disadvantages of mirror trading that you should be aware of.

No Option To Deviate From The Algorithm

Mirror trading is an automated form of trading, so there’s no option to deviate from the algorithm if you disagree with a trade. You can’t pick and choose which trades you follow – you’re committed to following the algorithm. Whilst many people enjoy this hands-off way of trading, some people prefer to have more control of their investments.

Unknown Logic

Trading algorithms are usually unpublished. This means that you’re relying on an algorithm whose logic you don’t understand. For this reason, mirror trading requires a high level of trust in the platform that you choose to use.

Large Initial Investment

To begin mirror trading, you’ll need to invest a large amount of capital from the start. This is a result of the large volume of trades being completed, meaning that there can be high levels of fluctuation in your account. For this reason, you’ll need to keep a close eye on your account to make sure that you have sufficient funds available at all times.

Risk Assessment

It’s hard to see what risks have been taken to achieve profits. For example, you might look at a mirror trading strategy and see that it’s returned 260% over the past 12 months. However, you can’t see the risk that has been taken to achieve that result. You might find that the investor had an initial 80% drawdown on their capital to achieve the eventual profits.

Scam Mirror Trading Platforms

Although there are several trustworthy mirror trading platforms on the market, there are also many scam platforms around. It can be hard to separate the scams from the genuine investment opportunities, making it difficult to choose a mirror trading platform.

Click here to discover the top 3 copy trading services

Mirror Trading Vs Copy Trading: What’s The Difference?

Mirror trading and copy trading have many similarities, especially when it comes to the time commitment required. Both systems allow for a more hands-off approach to trading, whilst allowing beginners to learn about trading from more established traders.

Copy trading is a variation of mirror trading which gives you greater control of your investments. Whilst mirror trading is entirely automated through algorithms, copy trading allows you to choose a specific trader to follow, either through an automated trade bot or by using a signal service.

If you choose to use a copy trading signal service, you’ll also be able to choose which trading actions you want to follow and which you want to ignore, giving you further control of your investments. You can also choose to follow different traders at different times or to follow multiple traders if you wish.

The choice between copy trading and mirror trading is a personal decision and it can be difficult to know which is right for you. Many people find that copy trading is the simpler and more flexible way to trade, offering higher levels of control over your investments whilst also giving you the freedom to relax without studying graphs.

Find out more about the top 3 copy trading services here

Learn to trade through copy trading - What is mirror trading

Learn To Trade Through Copy Trading

If you’re looking to learn about trading, copy trading is a great place to start. It allows you to learn from more established traders whilst also having your own input into your investments. Whilst it requires a low time commitment, it also allows you the freedom to pick and choose which trading actions you follow and which you want to ignore.

However, successful copy trading relies on choosing the right copy trading platform. There are many scam platforms out there and it can be hard to separate the scams from the genuine investment opportunities. That’s why I’ve put together a guide to the top 3 copy trading services, which have all been tried and tested by me.

Related Questions

Is Mirror Trading Legal?

Mirror trading is legal in most countries, providing the broker is properly registered and regulated with the relevant governing bodies. Financial authorities such as the FCA, ASIC and SEC are responsible for regulating mirror trading services.

You might have heard that mirror trading was part of a money laundering scheme in 2017. This led many people to associate mirror trading with criminal activity. However, the majority of mirror trading is done completely legally and is not associated with fraudulent activity.

Is Copy Trading Or Mirror Trading More Profitable?

Copy trading and mirror trading can both be profitable. However, the profits that you can make will depend on the platform that you choose to use and the traders that you choose to mimic. With mirror trading, you’re confined to using specific algorithms whilst copy trading allows you the choice of traders to copy.

It’s important to remember that profits are not guaranteed with copy trading and mirror trading and it’s also possible to make a loss.  

Is Mirror Trading A Safe Way To Make A Profit?

Mirror trading is popular with traders across the world, particularly those who are just starting out in trading or who don’t have the time to commit to traditional trading. It can be a safe way to make a profit if a reliable mirror trading platform is chosen and a successful algorithm is chosen.

Copy trading is a type of mirror trading which gives you greater control over your investments. You can choose which traders you want to follow and whether or not to copy each individual trading action.

If you’re ready to begin copy trading, check out my guide to the top 3 copy trading services for tips on choosing the right platform to start your journey.

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