Copy Trading and Mirror Trading

What are the Main Differences between Copy Trading and Mirror Trading?

Although many people may conflate the concepts of copy trading and mirror trading, these two investment strategies actually differ significantly. While both approaches involve traders tracking and emulating the investment decisions of others, they stand apart in several key respects.

What Makes Them Different

In contrast to copy trading, which has only gained popularity in recent years, mirror trading has been around since the early 2000s. It emerged as a natural evolution of algorithmic trading, and was initially reserved for institutional-level traders. However, as retail traders gained access to this technology, mirror trading became more widely available.

One of the key benefits of Mirror Trading is that it is fully automated, removing the potential for emotionally driven investment decisions. As the quality and transparency of available investment information has improved, Mirror Trading has become a more attractive option for traders looking for an effective alternative to traditional investment strategies.

Understanding Mirror Trading

Mirror trading is a fascinating investment strategy that enables traders to leverage the expertise of successful traders by emulating their investment decisions.

To get started with this form of trading, users typically utilize a platform provided by their broker, which allows them to view the history and details of various trading strategies.

From there, they can select a strategy that aligns with their investment goals and apply it to their account.

Once a strategy is chosen, the mirror trading platform one chooses will automatically execute trades that correspond to the selected strategy in the follower’s account.

This process eliminates the need for manual investment decisions and can help to mitigate the impact of emotional biases on trading performance.

There are always more opportunities for you to learn because of the social trading community by your side. You have people you can talk to and interact with to learn trading. 

How Copy Trading Differs from Mirror Trading

In contrast to mirror trading, copy trading is a relatively new technology that emerged as part of the broader social trading trend. Like mirror trading, copy trading allows traders to automatically copy the trading positions of successful traders.

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However, the key difference is that copy trading links the money management of follower trader funds to that of the pro trader.

Mirror trading, on the other hand, simply imitates the strategy of successful traders, without linking the fund control settings.

Both forms of trading can be incredibly effective investment strategies, but it’s essential to understand their differences to determine which approach is best suited to your investment goals and risk tolerance.

What Makes Both Trading Types Unique

One of the unique features of mirror trading is that it allows traders to customize their lot size for each trading position, giving them greater control over their investment strategy.

With mirror trading, you can decide how many trading positions in your account will emulate the trading signals provider, as well as the size of each position.

This is different from copy trading, where the follower trader is required to allocate a portion of their capital to the signal provider.

In copy trading, the amount allocated to each Signal Provider is typically determined as a percentage of the follower trader’s net balance.

Consider these Things before Getting Started

It’s important to note that both mirror and copy trading carry a level of risk, and past performance of signal providers is not necessarily an indication of future success.

Even top-performing traders can experience volatility and sudden drawdowns, making it difficult for follower traders to determine the best course of action.

When monitoring the trading performance of leading traders on social trading platforms or any social trading community, it’s common to see fluctuations in their performance over time.

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For follower traders, the most complex challenge is determining the optimal time to start following a signal provider and when to exit the arrangement.

They must weigh the potential benefits of following a successful trader against the risks associated with market volatility and fluctuations in the Signal Provider’s performance.

Final Thoughts

Overall, both copy trading and mirror Trading offer exciting opportunities for traders to leverage the knowledge and expertise of successful traders.

However, all traders, whether experienced or inexperienced must approach these strategies with caution, carefully monitoring the performance of signal providers and making informed decisions to mitigate risks and maximize potential returns.