Mirror Trading: How to Make Money Without Lifting a Finger

Financial markets are constantly evolving, and with them, the ways in which investors and traders buy and sell assets. New technologies are constantly emerging that can help investors and traders make more informed decisions, and one such technology is mirror trading.

In this article, we will explore the basics of mirror trading and discuss how it can be used to improve your trading results. We will also discuss some of the risks associated with mirror trading and how to mitigate them.

Charts showing the results of mirror trading

What is mirror trading?

Mirror trading is a type of social trading that allows investors to copy the trades of other, more experienced traders. This can be a great way for beginners to learn from the experts and get started in the world of trading.

Mirror trading is derived from new technologies in financial markets, helping the investor to improve his trading strategy.

Mirror trading appeared in 2000, even before copy trading, although many use the latter. Mirror trading is based on the fact of “reflecting” the strategy of other traders. This strategy is located on the server of the broker and includes indicators such as:

  • Gain levels.
  • Type of trading.
  • Investment capital.
  • Risk support level.
  • Assets to invest in.

The different indicators are directly replicated on the investor's account, thanks to the trading robots that currently operate in the markets.

Mirror trading helps financial market operators choose a trading strategy and automatically reflect the transactions made by another investor.

What considerations should be taken into account when using mirror trading?

Mirror trading is based on the most faithful reproduction of the strategy of other traders. This means that, before making a decision, they must analyse how well this strategy suits them. Therefore, they must take into account certain aspects such as:

  • That the reflected capital is similar to the money they have.
  • That the assets on which the trader invests are those that interest them.
  • That their goals are identical.
  • That their risk profile is the same as theirs.

Mirror trading is a strategy that can be profitable, but that should not be blindly and unconditionally followed. Even the best strategy or the highest-rated action can be affected. There is always the possibility of making money, just as there is the possibility of losing it.

It is also important to be vigilant so as not to fall into scams. Let's not think that there is a 100% safe system to get high returns by following a guru. Often, this is how certain platforms or trading options are sold.

Advantages and disadvantages of mirror trading

Among the advantages of mirror trading, we can highlight:

  • This strategy helps to reduce emotional risk. This is because investment decisions are automated, and the investor does not have to go through moments of stress to decide which operation to perform.
  • Continuing with the previous point, by reducing the stress for the investor, this strategy can be useful for beginners and for those who do not know very well how to manage their emotions at the time of investment. That is, those who are driven by panic or euphoria.
  • The level of transparency of the platforms can be a point in favour, since they usually require developers of strategies to pass demonstrative tests of the solidity of the results.
  • By automating operations, time is saved.

However, there are also drawbacks:

  • It is important to note that investors should not believe that they can become millionaires by replicating a trading strategy. The advertising surrounding mirror trading can be misleading in this regard, which does not mean that it is not possible to make money.
  • By replicating a strategy that does not diversify risk, it may be that this strategy fails and it is not wise to put all your eggs in the same basket.
  • Strategies do not work in all contexts. Some are adapted to times when the market has a clear trend, for example, but the same results will not be obtained when the market is undecided. It is crucial not only to know which strategy (or rather which developer) to follow, but also to understand the moment that the market is going through.
  • This can reduce the interest in learning and training in trading. This can be dangerous because, above all, knowledge is power, and it is this that, in the long run, will allow the investor to generate their own strategies.

👉 Find out the best strategies for all levels of traders.

Difference between mirror trading and copy trading

Copy trading can be confused with mirror trading. Both are similar, as they are based on replicating what another trader does, but they are not the same.

In copy trading, the investor who provides his information (to be followed) stores his operations on his own server. From there, it is sent to the trading company, which in turn sends it to its users.

On the other hand, in mirror trading, the investor who provides his data programs his strategy on the server of the trading company, not on his own server.

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How can I evaluate the performance of a mirror trading strategy?

Consider historical performance, risk-adjusted returns, drawdowns, consistency of profits, duration, and market conditions.

How can I protect myself from scams in mirror trading?

To avoid scams, research and choose reputable mirror trading platforms. Verify the credibility and track record of strategy providers. Look for transparent performance data, user feedback, and ratings. Be cautious of promises of unrealistically high returns or hidden fees.

Can mirror trading be customized to my individual preferences and risk appetite?

Yes, mirror trading can often be customized to your individual preferences and risk appetite.
You can choose strategies aligned with your risk tolerance, select specific assets or markets to focus on, and adjust position sizes according to your investment capital and risk appetite.

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