Mirror trading definition
the process which enables one trader to copy the trading activities of other traders
What is mirror trading?
Traders using the mirror trading strategy track and imitate the transactions and positions made by highly skilled and profitable traders. Mirror trading not only allows inexperienced traders to make a profit, but it also decreases or even eliminates the need for research and costs analysis. For this reason, this style of trading is commonly used by beginners or traders who don’t want to dedicate time on research.
Before mirroring someone's trades, it is important to check their trading strategy, risk aversion level, and investing style. Some people have an aggressive investing style or strategy, which means a higher level of risk and a higher level of profitability. Other traders make less profitable trades but with lower risk. Investing styles depend on personal preferences.
Types of mirror trading
There are several basic options available for traders who have opted for mirror trading.
Manual trading is the process in which the trader copies the trades (positions) of other traders but executes the transactions manually. With manual trading, the trader should perform the activity of buying and selling the underlying assets.
Automatic trading eliminates the need to perform the trades manually. All signals, such as transactions made by the leading traders, are automatically copied. Note that with automatic mirror trading, trades are made whenever the leading trader opens or closes a position in the market.