The development of trading software and lowered barriers to entering the financial markets allowed new traders to experience a wide range of trading strategies and plans, such as demo trading, copy trading, and automation tools. Thus, it is fair to say that the trading process has become much easier.
However, this does not mean that making money is that simple. More participants and traders mean higher competition, which adds more pressure on new traders to earn profits in the shortest time possible.
Some ways to shorten the learning curve are to follow the steps of successful traders and reduce the trial and error methodology, such as copy, mirror and social trading. Let’s explain each of these strategies and how you can use them.
Mirror vs Copy vs Social Trading Strategies
Modern trading platforms offer various automation tools that enable users to follow the steps of experts with multiple years of experience and proven portfolios, where a trader chooses the investment style that suits them most and the amount they want to trade.
Traders follow proven strategies of market experts in an attempt to land profitable trades sooner than doing it totally from scratch.
At the same time, the most successful investors made their wealth by learning from their mistakes, consistently trading in financial markets and improving their approaches to cope with updates and changes.
Therefore, it is important to maintain a perfect balance between self-reliance and dependence on pre-built strategies created by other traders.
There are three different styles of trading that follow the steps of other market experts: mirroring, copying, and social trading. Each of these approaches has distinct characteristics, which we will explain in the following.
Mirror Trading
Mirror trading entails the full reliance on a pre-built and saved trading system, including assets, strategies and decisions, based on your budget. This approach requires using trading automation software, deploying bots, and advanced algorithms to scan, analyse and execute the best market orders.
This strategy is beneficial for those who have little to no time researching and learning about financial markets and want to explore automated methods to execute trade decisions.
Moreover, new traders find this strategy valuable in shortening the learning curve by quickly engaging in the market and earning some profits. However, the downside is that it encourages total reliance on automation and does not nurture real education and hands-on experience.
Copy Trading
Copy trading may look similar to mirroring but with a degree of freedom for the trader to adjust the strategy according to their preferences. Thus, users can copy a trading system with full reliance, allowing them to change and alter the invested assets or orders, such as take-profit and stop-loss.
Copy trading provides a balanced combination of automation and manual execution, encouraging experimenting and nurturing learning by doing.
This strategy fits intermediate traders with valid financial market knowledge and who want to expand their practical experience. Therefore, it requires some time investment to research and implement trading tactics according to market updates and conditions.
Social Trading
Social trading was created with the popularity of trading communities, where investors and financial market enthusiasts gather online to share and discuss their opinions about markets and investments.
On these social platforms, members can share their strategies and outcomes of their actions, as well as some analyses and studies about certain market conditions. Thus, beginners can learn by communicating and brainstorming with likely-minded personnel.
Social trading is arguably one of the most beneficial ways to start trading by listening and interacting with entrepreneurs and traders who know a thing or two about financial markets.
Which Strategy is the Best?
Choosing the best trading methodology depends on the traders’s experience, availability and objectives. Usually, beginners who want to dedicate their time and effort to learning financial markets go for social trading, while those with a limited time rely on mirror trading.
On the other hand, copy trading fits those with sufficient knowledge about trading and who want to elevate their experience by implementing new strategies and suggestions from market experts.
In other words, social, copy, and mirror trading are tools offered by trading platforms, allowing traders to automate and rely on others’ advice in making investment decisions.
Each method has different characteristics and implementations by beginner and proficient traders. Therefore, identifying one’s knowledge and target is the best way to choose a suitable strategy.
