Mirror Trading seems like the perfect strategy. This type of trading has become very popular among Forex Traders. It has been around for a little more than 15 years. Mirror Trading allows you to trade without your emotions getting in the way. You don’t have to spend time studying the trends, different trading strategies, the charts and the news. All you have to do is copy or mirror someone else’s trades. Seems so easy, right? Seems almost fool proof. Mirror Trading is also known as Copy Trading and Social trading, and they are all essentially the same thing. With the same advantages and disadvantages. Let’s examine some of the pros and cons of Mirror Trading and see if it’s really the super solution it seems to be.
Mirror Trading can be especially helpful to people who are new to Forex Trading. When you mirror the trades or strategy of a more experienced trader you can use their experience to your advantage. It can be hard to choose a strategy to mirror without doing enough research to understand what your choices are and what the benefits are in your specific financial circumstances. Although it might be tempting to just follow someone who seems to be wealthy that really is not the best way to choose.
Mirror Trading is the ultimate way to take the emotion out of Forex trading. We all know that the high potential for profit and loss can lead to your emotions getting in the way of successful trading. When you chose someone else’s strategy, and copy it exactly, you eliminate the risk of your emotions leading you to make bad trading decisions. This method is much more objective and if you are a trader who is prone to rash decisions based on emotion it can save you a lot of money.
When you copy someone else’s trading strategy you have their history to use as your guide. Their trading strategy has been proven and their track record can speak for itself. The biggest caveat is that of course there are no guarantees. Just because a strategy has worked successfully in the past does not guarantee that it will continue to work. It is likely that the strategy will continue in the same way it has performed but it is not guaranteed.
Mirror trading is a little bit like mutual funds because you are trading based on the decisions and opinions of someone you trust to make your financial decisions for you. When you follow a professional money manager, when he profits you profit. When he loses, so do you. Most Mirror Trading platforms allow you to choose more than one professional to follow so that you can mitigate the risk somewhat and have a more balanced approach.
There are important statistics to look at when you are choosing a strategy to adopt as your own. Check the number of trades, the percentages of wins and losses, the percentage of the portfolio that has been risked, etc. Mirror Trading can be a life saver when used with caution and knowledge.