Mirror trading is the act of simply copying or ‘mirroring’ a different person’s trades. The idea is that one should be able to simply copy the action of a successful trader, and then reap the same rate of success.
As simple and intuitive as this proposition sounds, mirror trading is actually a bad idea.
Even if someone were to closely follow the actions of a consistently successful trader, the inherent delay between the original trade and the mirror trade leads to reduced profits on successful trades and expanded losses on unsuccessful ones.
Mirror Trading and Timing
The most difficult aspect of trading is timing. Identifying good trades is a necessary first step, but the actual execution itself is the most challenging part of trading, and will be the final determinant of the rate and degree of trading success.
The delay between the notifications received from mirror trading programs and the actual trade execution means that many trades will have become unprofitable or even loss-making by the time that they are executed.
Know Your Own Trades
It is critical that traders always understand every trade that they make. The world of finance is full of supposed experts, yet few people are actually consistently successful traders.
Those that are successful take the time to develop their own individualized strategies, most of which ultimately exploit the errors inherent in herd behavior instead of embracing them.
Mirror trading is the worst example of blindly following the herd, and is antithetical to the core values that successful traders hold.
Avoid the easy promise of profit from mirror trading companies, and focus instead and developing the knowledge, skills and experience that will lead you to make confident and successful trades each and every time.