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The mirror trading method allows traders in financial markets (and, to a lesser degree, stock markets) to select a trading strategy and to automatically "mirror" the trades executed by the selected strategies in the trader's brokerage account.
Traders can select strategies that match their personal trading preferences, such as risk tolerance and past profits. Once a strategy has been selected, all the signals sent by the strategy will be automatically applied to the client's brokerage account. The trades are delivered and executed automatically with entry and exit points on multiple currency pairs. No intervention is required by the client as all the account activity is controlled by the platform.
Clients may trade one or more strategies concurrently. This enables the trader to diversify their risk while maintaining trading control of their account.
Differences from Copy Trading and Program Trading
Mirror trading is sometimes also referred to as copy trading although copy trading differs slightly from mirror trading in the way that accounts are linked. In copy trading, the trader directly copies the moves of an individual successful trader; whereas in mirror trading, investment decisions are based on algorithms developed from trading patterns of number of successful traders. These other traders can come in the form of system developers, manual traders or financial institutions.
Mirror trading has certain distinctions from program trading.
Misperception regarding Fraud
Mirror trading was involved in a money laundering scandal in 2017, and the associated media has led some people to associate the term mirror trading with fraudulent activities; however, legitimate mirror trading is not fraudulent.
- Scott, Gordon; CMT. "Mirror Trading Definition". Investopedia. Retrieved 2020-04-10.