After listening to them, if you have wondered how you can get into the action and earn a passive income like them, mirror trading is what you should know about. If you don’t know about mirror trading, you are in the right place. But before plunking down your hard-earned money into your mirror trading account, you should first understand the mirror trading guide in detail.
In this article, you will get an idea of how to do mirror trading perfectly. But before you explore the effective mirror trading tips, read on to know what mirror trading is.
Mirror Trading Definition
The concept of mirror trading first came into existence during the early 2000s in the foreign exchange market. But it took some years for the equity market to get a hold of it.
Mirror trading is nothing but replicating the trades in your account by linking it to another account managed by a savvy investor. When you mirror trade with a well-known investor whom you follow, you will learn about the trade they are doing in their account. It will be replicated in your account.
Thus, with mirror trading, you will get an idea of their expertise and attain the same to make the most out of your financial investment. However, the trader you want to stay connected with and link your account to depends on the brokerage offering the service.
There are some big names relevant to this concept. Covestor, the most famous proponent of mirror trading, consists of more than 150 managers. You can study and mirror the portfolios of these managers with a Covestor account.
What’s more, have you heard about Ditto Trade? It is an online brokerage that became functional during the summer of 2012. This is also something that you should know about if you want to do mirror trading. It allows anyone to become a ‘lead trader.’ So, you can become one while using this.
How does Mirror Trading Work?
Mirror trading works differently based on the type of broker you have signed up to. In most cases, you will find a mirror trading feature accompanying it. All the successful traders known as masters will showcase the stunning results of their accounts through this feature.
To implement mirror trading, you need first to select a master trader with the same asset (forex or stock options) as you, who believes in the same trading techniques as you (for example, day trading or swing trading) and, most importantly, those who can risk their appetite. After finding such accounts, you should tie your account to theirs and completely mirror their positions. What do you mean by that? Well, if they make a trade, you do the same.
So, now you know how you can do mirror trading. But just having an idea of that won’t suffice. You need to know some expert tips to make the most out of it.
We will discuss them below:
Keep Your Mirror Trading Strategy Clear
Before doing mirror trading, you should have an idea of what your objectives and trading strategy are. Make sure you have a clear picture of whether you would like to mitigate your financial risks for earning stable gains or whether you would like to play safe, etc. Once you are very sure of all these aspects, it will be easy to do mirror trading according to your needs.
Explore the Data
There are several advantages of mirror trading, and one of the major ones is its transparency. If you do mirror trading, you will become aware of the quantitative and qualitative data about each TraM. And this will further help you to make the right decision.
Make sure you keep an eye on the metrics like the number of followers, performance, description of the strategy, targets, and the allocated capital of the master investors. This will help you compare these indicators to figure out whether they match your mirror trading strategy. If they do, go for it!
Fix Your Budget
If you want to stay safe and secure in the market of cryptocurrency, you need first to ensure the size of your mirror investment. You should start with allocating € or bitcoins to a TraM. And later to that, adjust all your allocations. For all the positions that your TraM manager will open and close, you will get a copy of the same to your TraM wallet.
Focus on Drawdown Along with Profit
Typically, most users start their search by sorting for the list of the traders who have the highest percentage returns. This is good because you want to earn money from mirror trading.
However, you should also be cautious about not taking any unnecessary risks. That’s why it is important to check the drawdown percentage. It is nothing but the biggest peak-to-trough decline in the performance level of any master trader. This figure will show you the biggest loss that the trader has sustained in his performance. You must check this vital statistic while choosing a trader to follow for mirror trading.
Go for Verified Accounts
Verified accounts are authentic trading accounts that a broker has verified. Some systems run on demo accounts in the form of hypothetical models. The actual results of these accounts can differ significantly during live trading conditions. So, if you are going to start mirror trading, it is recommended to follow only verified accounts that have performed well in real markets.
Wrapping Up
If you are starting to invest your money, mirror trading is one of the best ways. And its concept is now absolutely clear to you. Isn’t it? All you need to do is stay cautious and use only the good part of this trading type. Mirror trading is a legal process regulated by most of the world’s best financial authorities like FCA, ASIC, SEC, etc.
Are you planning to try your hands on mirror trading?
Take the first step now!
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