The phrases “copy trading” and “mirror trading” are often used interchangeably. But are they the same thing? It may surprise you to learn that copy trading and mirror trading are defined differently.
This post will go over the differences between forex copy trading and mirror trading, along with the pros and cons of each. That way, you can make an informed decision about whether to use either or both in your trading.
What is Copy Trading?
Copy trading is a feature offered by forex brokers that allows you to duplicate the trades of other individual traders in your account.
Copy trading is normally automated. You pick the trader you want to copy, input how much to risk, and the trades are executed in your account in real-time as the trader you are copying takes them.
What is Mirror Trading?
Mirror trading also is automated. But instead of copying individual human traders, instead, you copy their strategies. An algorithmic system executes the trades, and there generally less manual control available.
We should note that sometimes we see people give different definitions of mirror trading. But as this is the most common one, it is the one we will be going with for this post.
Copy Trading Pros and Cons
Now that you know what copy trading and mirror trading are, let’s take a look at the advantages and drawbacks of each. We’ll begin with the pros and cons of copy trading.
Pros:
- Copy trading is easy once you have found traders to copy. You just tell the platform which traders you want to copy and how much you are willing to risk. The trades happen automatically (unless you choose to do them manually, and that option is supported).
- Anyone can do copy trading, even a beginner with relatively little knowledge of forex.
- When you copy specific trades, you know that you can expect the same results as the trader you are copying (which may not always be the case with mirror trading).
Cons:
- Copy trading encourages some traders to be lazy and not learn how to trade for themselves.
- As an automated method, copy trading does not give you a lot of control.
- You may sometimes need to replace traders you are copying, should they start trading poorly.
- As you can only copy exact trades that someone else is making, you may miss out on opportunities across other assets and timeframes.
Mirror Trading Pros and Cons
Having explored the pros and cons of copy trading, let’s now take a look at the advantages and disadvantages of mirror trading.
Pros:
- As with copy trading, mirror trading is an easy, low-effort approach to forex trading. After you decide which strategies you want to mirror, you can just kick back and watch. The trades are automatically executed.
- Like copy trading, mirror trading is an ideal method for beginners.
- Since you are mirroring a strategy rather than specific trades taken by individual traders, you can mirror that strategy across a broad range of assets and timeframes. How well this works depends on the strategy and how well it translates to different assets and timeframes.
Cons:
- In theory, the strategies you mirror may not always be effective across all assets in timeframes. So, depending on which ones they are executed on, you might see variations in how effective they are.
- As with copy trading, you do not have a ton of control over your trading when you are doing mirror trading, since it is automated.
- The other drawbacks of mirror trading are also similar to those with copy trading. Automating your trading like this is convenient, but it may discourage you from learning how to trade manually.
- If the strategies you are mirroring stop being effective, then you will have to find new ones to mirror. So, the method is not 100% passive (as is true with copy trading as well).
Copy Trading vs. Mirror Trading: Which is Right for You?
The best way to decide whether you should try copy trading or mirror trading is to read carefully through the pros and cons of each above, and think about which one you would prefer.
Both copy trading and mirror trading will save you a lot of time and effort with your day-to-day forex routine. Most of the time, you will just wait and see whether you win or lose trades as they are placed automatically.
If you want to exactly duplicate what a profitable trader is doing in their account and get the same results, then you should try copy trading.
But if you prefer to automate a strategy across more assets and timeframes, then mirror trading makes more sense.
You do not have to choose either copy trading or mirror trading alone. It is perfectly okay to do both. In fact, you may discover this is the best way to make use of all opportunities.
Regardless of whether you do copy trading, mirror trading, or both, make sure that you keep a close eye on your results.
If you are maintaining your profitability, then you do not need to do anything. But if you start noticing any reduction in your profitability, you may need to pause one or more of the strategies or traders you are mirroring or copying once you establish which ones are no longer producing profitable results.
At that point, you just need to search for some more traders to copy or strategies to mirror. You can then get back to being profitable again, and return to mirror trading and copy trading passively generating wins.
