Mirror trading is a strategy of copying all the trades of an experienced forex investor algorithmically. Mirror trading was initially available to institutional clients but over time it began to be offered to retail clients. Mirror trading has been around since the early 2000’s and is an evolution of trading algorithms. Mirror trading is also considered as the forerunner of the now popular copy trading and social trading.
The way mirror trading works is quite simple, traders will see the performance of experienced traders’ trading strategies based on the level of risk, initial capital, investment goals, and other factors. For example, if we do mirror trading with Trader Budi, every time trader X takes a position, our mirror trading account will automatically replicate a position similar to that of trader Budi.
Copy trading is a further development of mirror trading. Where in copy trading, traders can copy individual trades or trading strategies as a whole but with the ability to intervene into trading accounts. This intervention is in the form of the ability to allocate a percentage of the balance for copy trading of one trader or several traders at once.
In addition, traders who provide copy trading signals will charge a subscription fee to traders who make copy trades. They will also get a rebate from every transaction. The purpose of this kind of compensation is for traders to allow others to copy the trades they make.
What’s the difference between mirror trading and copy trading
– In mirror trading, all trading transactions will be copied and applied to the account. While in copy trading, traders can allocate part of the balance for copy trading (not completely).
– Mirror trading requires additional plugins to be installed on meta trader, while copy trading is unnecessary.
– Mirror trading has a higher level of risk because we need to adjust the balance to that of the trader to be mirrored, while the level of risk in copy trading is lower because traders can limit the use of their balance.
– Mirror trading requires bigger capital than copy trading.
– Copy trading is a further development of mirror trading with a number of additional features.
– In mirror trading, traders will copy live trades made by traders, while copied trades can be direct trades, robots, or institutional trader trades.
-Mirror trading charges a service fee to the broker and the broker can pass it on to the client or not. Conversely, in copy trading, fees are charged directly to the trader (end user).
The world of forex trading continues to evolve according to current technological advances. This provides an opportunity for traders to innovate by providing a touch of technology in their trading activities. The two most popular forms are mirror trading and copy trading.
Now, the two above have a lot in common, so sometimes some people find it difficult to find differences in mirror trading and copy trading. Therefore, so as not to overturn the understanding and explanation of each of the strategies above, it would be nice if I gave an answer according to my understanding, which was stated simply.
Mirror trading is a method of imitating the activities of professional traders into our trading account. When we decide to join and register for mirror trading with one of the pro traders, most of us have to pay a fee of several dollars for each transaction or in units of time such as one month or one year.
Now what is meant by mirror trading is that we really imitate as a whole what is done by the traders that are followed. Starting from the type of account whether it is a standard account, ECN, or another type, where is the trading server, then how much capital is used, the lot size positioned and so on. It can be said that it really is one hundred percent equal. Now to do mirror trading, we can install additional plugins on metatrader and join pro traders who open mirror trading services.
Meanwhile, copy trading is a method used to copy the positions of the traders you follow. In this case, copy trading is more specific to the position taken, whether selling or buying. As for other variables such as the amount of capital, account type, server used, transaction lots, all of which can be adjusted by each follower.
This will allow retail traders with capital that is not too large to join and feel how the sensation of trading with professionals. Traders can adjust many things according to their abilities and preferences.
So the difference between mirror trading and copy trading can be seen from the emulated variables. Where for mirror trading it will imitate professional traders as a whole, while for copy trading it only copies executed positions, while other variables can still be adjusted by follower traders.
* Percentage of transaction imitations
In mirror trading, there is a transaction imitation of up to 100 percent, while in copy trading there is a feature to limit the number of transactions copied.
* signal provider
Mirror trading services were originally provided by a trading and investment company that transacted in many instruments and asset classes ranging from stocks, bonds, to forex. Meanwhile, copy trading services are mostly provided by individual traders who tend to focus on just one instrument, such as forex.
* Signal providers
In mirror trading, only a group of people provide signals, while copy trading is more flexible because it can be done by robots (expert advisors) or humans.
* Required capital
Because mirror trading can make asset transactions such as stocks to bonds which often do not provide leverage at all, meaning that super large capital is needed to imitate all transactions. Especially for copy trading, usually transacting foreign currencies that provide leverage services so that subscribers can imitate transactions using smaller capital and lots
* Capital and lot adjustments
In mirror trading, you really imitate without adjusting the amount of capital and lots. For example, mirror trading service provider A has USD 1,000,000 in capital with a transaction size of 10 lots, while X, as service user A, only has USD 1,000 in capital. The reality is that transactions on account X will result in transactions with a size of 10 lots that are not in accordance with the principles of low risk money management.
* In copy trading there is a feature of adjusting the amount of capital and lots. For example, copy trading service provider B has a capital of USD 10,000 in his account and is used to trading with 1 lot size. Y as a subscriber with a capital of USD 1,000 can decide to allocate 50% of his capital for signal B while reducing the lot by half. This means that the available capital for copy trading is only USD 500 with a transaction size of 0.5 lots.
