computer science

Mirror trading

Mirror trading is a computer science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Mirror trading rather than just read about it. In short: Mirror trading is a trading selection methodology that can be carried out in both the foreign exchange and the stock markets; however, this is much more common in trading in the foreign exchange market. The mirror trading method allows traders in financial markets (and, to a lesser degree, stock markets) to select a trading strategy and to automatically "mirror" the trades executed by the selected strategies in the…

Key takeaways

Mirror trading belongs to computer science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Mirror trading to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Mirror trading from memory before moving on to harder problems.

Reference excerpt

Mirror trading is a trading selection methodology that can be carried out in both the foreign exchange and the stock markets; however, this is much more common in trading in the foreign exchange market. The mirror trading method allows traders in financial markets (and, to a lesser degree, stock markets) to select a trading strategy and to automatically "mirror" the trades executed by the selected strategies in the trader's brokerage account. There are two specifics of mirror trading. The first is connected with fundamentals of trading: to execute trades, investors copy signal services and auto-trading services. The second factor relates to the investment amounts, as mirror trading is linked to large investments. Traders can select strategies that match their personal trading preferences, such as risk tolerance and past profits. Once a strategy has been selected, all the signals sent by the strategy will be automatically applied to the client's brokerage account. The trades are delivered and executed automatically with entry and exit points on multiple currency pairs. No intervention is required by the client as all the account activity is controlled by the platform. Clients may trade one or more strategies concurrently. This enables the trader to diversify their risk while maintaining trading control of their account.

History Since its inception in the early 2000s, mirror trading has become widespread on financial markets. Mirror trading has influenced the development of copy trading and social trading. Mirror trading and copy trading were preceded by automated and algorithmic trading. There existed an automated trading system (ATS) that allowed brokers to share their trading history with others. Mirror Trader was one of the first auto-trading systems that was introduced in 2005. It was developed by Tradency. With the development of financial instruments and digital tools, mirror trading gradually entered the portfolios of companies. Since 2007, ETX Capital has made publicly available on its platform a range of financial instruments, including mirror trading. The same year, IC Markets (International Capital Markets) began offering mirror trading, later growing to 200 countries globally with a trading record of US$1.016 trillion per month in 2021. In 2010, eToro launched an electronic trading platform that started offering mirror trading operations in 130 countries, in 15 languages, to 25 million users globally, administering clients' assets totaling US$10.6 billion. In 2012, FXCM (Forex Capital Markets) released an app-based trading platform with mirror trading. The same year, the European Securities and Markets Authority (ESMA) stated that mirror trading and copy trading constitute automated execution of trade signals and operate without client interaction.

Mirror trading vs. copy trading Mirror trading is sometimes also referred to as copy trading although copy trading differs slightly from mirror trading in the way that accounts are linked. In copy trading, the trader directly copies the moves of an individual successful trader; whereas in mirror trading, investment decisions are based on algorithms developed from trading patterns of a number of successful traders. Forex brokers that offer mirror trading typically review, verify, and validate the trading results of strategies they add to their platform, which aids in identifying and eliminating losing trades. Before accepting a new strategy, a broker may require it to have a 12-month track record of profitability and a certain maximum drawdown limit. Traders might be system developers, individual investors, or financial organizations.

Differences from copy trading and program trading Mirror Trading and Copy Trading are both examples of social trading, which utilizes social networks and websites such as Twitter, YouTube, and Facebook to enable users to communicate and trade investment-related information. Social trading is a relatively new method for obtaining investment ideas and trading advice, as compared to the traditional utilization of the opinions of professionals and experts. While engaging in social trading, there are always two alternatives users could choose from: Mirror Trading and copy trading.

Misperception regarding fraud Due to the mirror-trading money laundering scheme performed by the Deutsche Bank’s Moscow, New York and London branches in 2017, the term mirror trading began to be associated with fraudulent activities. In contrast, legitimate mirror trading is not fraudulent and is considered to be advantageous for novice investors. This outcome could be explained by the usage of algorithmic key elements in mirror trading. They replicate successful trades and patterns of experienced traders without depending on individual emotions. The process of mirror trading involves participants aligning their financial decisions with those of an established trader. This means that not everyone who engages in mirror trading is required to have expertise or experience with the assets they choose to trade. In the decade preceding the Russian mirror-trading scheme, Deutsche Bank was informed of substantial and widespread compliance concerns. The offsetting trades in this instance lacked economic purpose and could have been used to facilitate money laundering or other illegal activity.

See also Algorithmic trading Social trading Copy trading List of asset management firms P2P asset management Trading strategy Electronic trading platform

References

Worked examples

Example 1 — a first encounter with Mirror trading

Start with the simplest possible case. Write down what Mirror trading claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In computer science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Mirror trading before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Mirror trading ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Mirror trading

In research: Mirror trading appears in computer science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Mirror trading in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Mirror trading is common in secondary-school and first-year university syllabi. It links to neighbouring topics Algorithmic trading, Electronic trading systems, Financial markets, so understanding it makes those chapters shorter.
In everyday life: Look for Mirror trading outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Mirror trading in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Mirror trading means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Mirror trading out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Mirror trading in simple terms?

Why does Mirror trading matter?

Because it connects several computer science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Mirror trading?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Mirror trading.