The digital revolution has revolutionized the world of trading and finance by democratizing transactions and exchange of information. In addition to community trading, crowdfunding and inter-personal lending, mirror trading, also known as copy trading, has emerged. Result of the mixture between social networks and trading, the mirror trading today is a great success as well with novices on the stock market and Forex as experienced traders: portrait of one of the latest trends in finance 2.0.

  • Faced with the lack of transparency and high costs associated with traditional brokerage, traders began to gather on virtual spaces, forums and community sites dedicated to the exchange and sharing of information. Put at the fingertips of the mouse thanks to the online brokerage sites, the trading also attracts for a few years a growing number of Internet users wishing to enlarge their portfolio and succeed in pretty shots. The democratization of trading is real , and in this huge virtual trading room that has become the web, professionals are now mingled with fans. It is in this context that mirror trading was born, a form, pushed to the extreme, of community trading.

Its principle?

The most experienced traders offer Internet users to automatically copy the transactions they perform. All you need to do is subscribe to a trader’s feed so that each of his transactions is copied to your account. By its extreme simplicity, mirror trading allows those who do not have the experience or the knowledge to navigate the meandering stock market or Forex trader without studying fundamental or technical analysis. In a way, copy trading looks like automatic trading, with the difference that it is based on a human algorithm? It is the intuition and knowledge of the most experienced traders who show the way to others, not computer calculations. You need a https://www.amarkets.com/trading-platforms/ for this job.

If it was cited by the American research firm as one of the top ten financial trends of 2012, copy trading however draws criticism. One often points to the danger of blindly emulating the decisions of others. In reality, mimicry has always been a reality in the world of finance, as investors generally follow the recommendations of large analytical firms. In a complex and uncertain environment, relying on others is therefore a very rational strategy, especially if one is not experienced, if one does not have the time to inform oneself or if we do not want to let his stress and emotions affect his portfolio.

A controversial system

The cost of mirror trading has also been pointed out; some platforms earn commissions of up to 2% of assets, which is much more than the fees charged by professionals who manage customized portfolios for their clients. The choice of the copy trading platform is thus crucial.

To counter criticism, copy trading platforms set up safeguards, by imposing trial periods for traders who decide to share their decisions and with a focus on transparency. Statistics and history thus make it possible to know the past performance of “signal providers” and to identify the most reliable and regular traders. In addition to its transparency, mirror trading has another major asset: its speed. Since transactions are automated, the execution time is kept to a minimum.