You have decided to start trading online. You read about several platforms and know you can mirror trade. But what about Copy Trading – one of the simplest methods of online trading. Have you thought of trying that?
This page will present the differences between these two concepts: Mirror Trading and eToro’s CopyTrading.
What is Mirror Trading?
Mirror Trading has been in use in the foreign exchange market since the early 2000s. Essentially, it is the concept of copying someone else’s trades and has become increasingly popular with smaller businesses in the online currency trading arena. What could be simpler than having the best traders in the world handle your trades, completely automating your trading experience? No intervention is required from the client as the platform controls all the account activity. All you need to do is log in once a week to see your account balance.
Some platforms who offer Mirror Trading achieve it by accumulating experienced traders from various parts of the world. They provide these traders with free trading accounts, which allows these platforms to display impressive performance histories when audited or tested. In parallel, these mirror-trading companies keep displaying these traders’ performance records and updating them regularly on their websites.
Built into their programs, these companies have agreements in place with several brokers. The companies configure many of the broker’s accounts into one single ‘master account’ controlled by the company. The individual accounts are held by the broker and the ‘master account’ with the company. The company awards the master account to the top performers, and it is mirrored in other connected accounts.
Once the client chooses a trader to operate their account, they are advised to open an account with the recommended broker for this master account. After this account is opened, it is auto-configured to the selected trader’s master account. From that moment on, whatever the trader does on their own account is automatically replicated/mirrored in the client’s account. The client is free to select their own risk-management parameters, so occasional aggression or trade failure does not necessarily reflect in the client’s account.
Bearing in mind what you have just read, let’s see how eToro has revolutionised this Mirror Trading concept and turned it into more of a Social Trading feel, and in doing so, making Mirror Trading simpler.
What is Copy Trading?
eToro has pioneered the concept of Copy Trading, which enables you to automatically copy traders of your choosing, replicating what they do in your own accounts. Simply put, it’s trading in financial markets by having other people from around the world doing the trading on your behalf.
Next, let’s take a look at the eToro social features that have revolutionised online trading. On the eToro trading platform’s feed, you can view the basic components that constitute social trading, including: Seeing what other traders are doing in real-time, following the top performers and copying the traders you like.
When logging into eToro, you can immediately notice that this trading platform does not look like any other in online trading today. Complicated charts are presented in a user-friendly way, and parts of the platform look more like a social network than a trading platform. Only on eToro can you follow other traders and see their recent activity on your watch list – a live trading feed of the people and assets you choose to follow.
Another helpful feature is copy trading (Based on eToro’s patented CopyTrader™ technology). This tool allows you to automatically copy successful traders and open the same positions as they do. In effect, you are building your own people-based portfolio. This feature is a great solution for those who wish to take part in the online trading industry, but simply don’t have the time to invest or the devotion to start learning financials. You can just copy your favourite traders and benefit from their knowledge and experience.
How to get started with Copy Trading
Firstly we recommend looking at Popular Investors in the Editor’s Choice section. The traders displayed there are those who have maintained a low-risk score and have shown gains in recent months. You can also use the people discovery tool to find more traders to copy.
Search results can be filtered by gain, risk score, country of origin and other factors. If you see someone you want to copy, click on their profile and instantly see their recent stats, bio, trading strategy and an array of other helpful stats. If you decide that this is the trader you want to copy, all you need to do is click ‘Copy’ and decide on the amount you want to allocate out of the total equity in your account. All executions are done proportionally, meaning that if you allocate $1,000 to copy a trader who has a $10,000 trading account, when they open a $1,000 position, a $100 copied position will be created in your account. This enables you not only to copy the position’s direction, but also the trader’s applied investment strategy. Remember, one of the most important things you need to know is to diversify your investments and risks over a wide range wisely. With copy trading, your investments are inherently risk diversified, as long as the copied trader manages their risk the same way. We encourage our clients to manage their risks as part of our Responsible Trading policy.
Over the years, we have seen how CopyTrader and Copy Trading revolutionised the way people trade and invest. If you don’t have an eToro account, you can try Copy Trading for FREE using a $100,000 virtual trading account.