Copy trading is what we already know, but what is mirror trading? Mirror trading is not a crypto trading strategy like arbitration. This marketing technique has been here since the early 2000s for stock markets. Generally, mirror trading is the process of automatically copying the trading strategies of expert traders and strategy makers. Let us talk more in detail about mirror trading and how Automated trading bot development will impact them.
What is Mirror Trading?
Basically, a trader can choose a strategy based on their profitability, risk, and the success rate of the trader who uses it. By doing this, the lack of experience of a trader gets compensated by replicating an already existing successful strategy. When mirror trading entered the market, it earned a good impression and popularity among audiences. So, the emerging cryptocurrency market also adopted it in addition to several other features of conventional trading.
Mirror trading is in the form of social crypto trading platforms, where a community can be drawn by traders and replicate each other’s trading strategies. However, you have to be clear about the contrasts between the crypto and the stock exchange market, and how mirror trading will impact both.
What Are The Risks Involved In Mirror Trading?
We all are very familiar with the volatility of the crypto market. Not only the trading strategies are time-sensitive, but they are also ineffective when a mass trader population attempts them. So, if you mirror such types of strategies, then there is a high chance that the strategy will diminish, leading most traders to lose their investments.
Liquidity of the crypto assets is also an issue because some Altcoins may become elusive in the necessary amount for the number of traders that mirror trading fetches. While these problems are significant, several strategies can yield fruitful results when mirrored. If a trader’s research is good enough to find out those strategies, then mirror trading will become their advantage.
At the same time, traders with less experience may face these issues. In such circumstances, they can get help from professional strategy makers to evaluate their trading strategies.
Benefits Of Mirror Trading For Crypto Traders
Coming up with a new strategy on their own comes up with a set of risks for a trader. So, implementing a mirror strategy will eliminate the risks like falling for FOMO trends and making emotional decisions. Factually speaking, traders can simply check the output of a strategy they want to mirror and then decide whether it is suited for them.
However, if the market condition starts to change, then the trader mirroring the strategy may like to switch to a different strategy suitable for the new situation. Meantime, the strategy maker will adjust the strategy based on the market situation.
Time to Start Mirroring
Mirror trading is obviously a valuable tool in the cryptocurrency market. However, the one who uses this strategy should keep the risk factors and asset liquidity in mind. Other than that, mirror trading is suitable for inexperienced traders who are not yet ready to stand on their own in the crypto market to kickstart their crypto journey. If this technique interest you, contact a professional cryptocurrency trading bots development company to create an automated bot to perform mirror trading.