If you are tired of looking for the perfect strategy, and emotions get in the way - you exit winning trades too early, do not limit losses on losers, then maybe you should consider the option of "mirror trading". Becoming extremely popular in the forex market, mirror trading is a way of imitating the methods and approaches of successful traders. Even though it sounds simple enough and profitable, before, how to start betting real money on a mirror trading strategy, there are a few things to consider.
Mirror method
Mirror trading is a method, selected by a trader from the available list of trading strategies, which he would like to apply on his trading account. After that, the program / method for this strategy is placed / executed on the trader's account, thus, trading is carried out strictly according to the chosen strategy. Trader can potentially choose some parameters for the executed strategy, but the ultimate goal of mirror trading is to remove emotions from the trading system and entrust potential profits (or loss) Method, which is objective. In particular, many novice traders often buy at highs and sell at lows - this can be avoided, using some simple strategies.
Certainly, a trader may have some anxiety about this approach - and trading programs and auto-trading can lead to misunderstanding of the market and the methods used. Yet. Mirror trading is much more transparent, than traditional «trading robots», often used to scare retail traders.
Benefits
Mirror trading is much more transparent, than other automated trading methods. Here are some of the benefits:
A trader chooses exactly that strategy from hundreds of potentially available ones, which best suits his financial goals, ambitions and opportunities.
Real strategy results can be seen even earlier, how it will be applied. They, who sell automatic trading robots, will rarely update data on the work of their programs. Mirror trading strategies usually show updated results daily, so the trader knows, how the strategy actually worked before using it.
The trader may consider such additional criteria, as traded currency pairs, how many transactions were made (very important parameter, because it is desirable to see the result based on many trades, not two or three). percentage of winning and losing trades. trading period of the program, average profit and average loss on trades. One of the most important statistical parameters is the maximum drawdown. This is the greatest loss, which a trader would have encountered when using the program. This indicator should be weighted against the average wins and losses., as well as the capital available to the trader. Traders should avoid systems, where the maximum recession could wipe out their trading account, no matter how good other statistics look.
Emotions can be removed from trading. The trader is not worried about, when to enter and exit the market.
Usually (it depends on the broker and the trading platform), deals are made regardless of, your computer is turned off or on. Poetogu. very important. so that the trader is comfortable with the chosen strategy.
The trader can continue to enter trades manually in addition to automatic trading, which is implemented by the program.
When considering the benefits, very important, for the trader to disassemble in detail, what each strategy has to offer him. This can only really be determined if, if there is a long history and a large number of transactions, which were concluded in accordance with the strategy. The results must also be obtained on real, not a demo account. And especially important, so that a series of losing trades does not destroy your trading account, and did not even lead to the loss of most of the account.
disadvantages
It looks like a beautiful dream to have a program., which makes money, while you sleep. But there are some disadvantages, which a trader needs to know about:
Results not reflected in the report were obtained in real trading. That's why, a trader must carefully analyze, how the results were achieved, and are all transactions, for which trading signals were received, were reflected in the presented results.
Markets are constantly changing. If a currency pair has been in a range for a long period of time, and begins to develop a trend, then the results may not reflect, how the strategy will work in a trending market. In particular, for a range strategy, it is recommended to choose pairs, which do not include the US dollar.
Results are usually calculated based on a model account. The trader must understand, what. if he trades with much less funds, then his account can be completely destroyed. Some will actually use this as a limit on the amount of risk.. but, several losing trades in a row can destroy a small account, leading only to a slight decline in assets in a large account.
The strategy continues to work, until you stop her. It means, that the trader must be vigilant in monitoring his account and the operation of the strategy.
Closed positions do not reflect the trader's full risk. For example, the maximum loss recorded may be 100 points, Nevertheless, for some deals, current losses could reach, for example. 200 or 300 points. It is very important to take into account how much the strategy allows the position to go into the negative zone.
Final results, shown by strategy, often inaccurate for real trading. You must go through the entire trading history, to see, what deals were actually concluded "live". Profit numbers often include hypothetical profits, accumulated during the initial testing or the initial stage of the program launch.
Applying a mirror strategy
Not all Brokers offer the possibility of mirror trade- so a trader must first find a reliable broker, which provides a similar service and opens the corresponding accounts, that support and function with mirror trading programs. There are also third companies, who work with many brokers to place automated trades on traders' accounts. Thereby, the trader can use their current trading accounts, without the need to open your new account. After financing the account, or using a demo account. the trader gets access to this service. The trader then looks at the available mirror trading programs.. evaluates results and then chooses strategies, which he wants to use on his trading account.
The trader will need to authorize the broker (or to a third party) place deals on the selected strategy on your account. The confirmation is. that trading signals will be used on the account. Then the trader must determine, how much volume he wants to trade on each trading signal, as well as how many open lots he can have at any given time (to manage risk). Thereafter, trader can observe, does the strategy work according to statistics. Otherwise, the strategy can be removed from the account at any time.
Conclusion
The decision to use a mirror trading strategy must be approached very carefully.. At the end of the horses. we are talking about real money. Study all statistics carefully, and make sure, that it matches your risk tolerance and available capital. Setting up a mirrored trading strategy and corresponding trading account is a relatively straightforward process, and usually takes no more than a week. Should be considered, that markets are constantly changing and past performance does not always guarantee future results. There is a risk in every trade you make, but if you can assess the risk, then you can control it.
