What is mirror trading?
A method of trading in which a trader sets trading strategies that get automatically applied to their account. This often involves copying the strategies of more experienced traders.
Where have you heard about mirror trading?
Mirror trading emerged in the early 2000s and has grown into a large industry. You may also hear the terms copy trading and social trading which refer to similar methods.
What you need to know about mirror trading...
Mirror trading platforms use a selection process to identify high-performing traders (signal providers). To follow one of these strategies you open an account with one of the supporting brokers and this account is then linked to the signal provider’s account. Whenever they carry out a trade, this is also executed in your account.
Mirror trading can help prevent investors making emotional decisions by separating themselves from the decision-making process. By trading more than one strategy concurrently, traders can diversify their risk.
Before copying a trader’s strategy, you’ll need to understand their trading style so you can set appropriate risk parameters. You’ll also need to keep a close eye on your account to make sure you don’t overtrade. A similar, but less intimidating, model is used for copy trading.