Don’t Mirror Trade

What Is Mirror Trading & How Does It Work?

First, let’s learn about what mirror trading is. The term mirror trading comes from
the act of following an experienced trader into his or her trades especially via
alerts. There are services out in the world that do nothing more than put out
trade alerts after a trader takes a position. These alerts are received in real-time
or with lag via emails, text messages, or chat posts by individual traders that pay
to receive the alerts.

 

This concept is something many new traders are not aware
of due to a lack of day trading education, this is why day trading education once
again proves to be absolutely necessary for all new day traders. Below we will go
over some reasons why mirror trading is not suggested for new day traders and
yet another reason why new day traders should focus solely on day trading
education to start.

What Is Mirror Trading & How Does It Work?

Mirror trading does not work for two reasons. The first reason and possibly the
most important reason is that you learn nothing when you practice mirror
trading. When you mirror trade all you are doing is blindly following someone into
a trade without knowing the reasons why they have entered the trade let alone
why they have a stop loss at a given level and profit targets per-determined.

 

If the person you are mirror trading knows how to trade they will have a trading plan in place before they even enter the trade and you might not be aware of this plan nor know how to read certain signals an experienced trader will know how to
read during a trade. These are things you would learn during your day trading
education time.

 

Because you do not know what is truly going on with the trade
plan you have no idea how to look for potentially early exit indicators that could
save you a lot of money! You don’t know how to spot slowing volume, selling
pressure, bearish engulfing candle patterns, as well as many other potential
signals you will miss! These are signals you would learn during your day trading
education which could indicate you to exit a trade early before it goes against
you. But you will never learn them as a mirror trader.

Stop mirror trading

But the easiest way one can get around the PDT rule is by trading in a cash
account. The PDT rule only applies to margin accounts or instant settlement
accounts were your funds settle instantly after you close a trade so you can enter
another right away if you chose to do so. However, with a cash account your
funds do not settle instantly rather they take 2 days so the day you traded counts
as day 1 the next day is day 2 and on the following day, your cash is settled and
ready for you to use again. In theory, you can day trade every day with a cash
account as long as you are trading settled cash.

The second reason why mirror trading does not work is that by the time a trade
alert is sent out especially if a stock has a very low float the price can move so fast

that there is no way for you to enter at or near the alert price. This means if you
chased it you are in much higher than the person you are following. Next comes
the sell alert or the stopped-out alert this too will be an issue for you to sell at
because of the delay between the alert price and the time you get it which could
be a second or more and that makes a big difference in the world of day trading.
These two reasons alone should persuade you to truly educate your self in day
trading instead of becoming a mirror trader which never works out.