Mirror Trading

[stockGURU]

One of the newest trading fads to emerge in recent times is "Mirror Trading". In short, it's like back betting at a casino, where you place your bet behind that of the gambler sitting at the blackjack table who is actually making the decisions. If he wins, you win. If he loses, you do too.

Mirror Trading is the stock market equivalent of back betting. You can decide to "follow" another trader of your choice who adopts a strategy that suits your particular risk profile. When he/she trades, you do as well, making the exact same trades automatically. The mirror trader makes no trading decisions at all; the platform places all the trades for them based on the trades of the trader that they have chosen to follow.

Do ASF members think that there is something to be gained by automatically following the trades of an experienced trader? Or is this just another gimmicky fad destined to end in controversy and a flurry of lawsuits?

Day Trade and Keep Your Day Job
By THERESA W. CAREY

A new online brokerage firm, DittoTrade, lets you mimic the trades of professionals—and get the same prices they do.

A new online broker is opening with an interesting twist. Aside from the usual online features, DittoTrade lets you buy and sell right alongside an experienced trader.

DittoTrade's CEO, Joseph Fox, has prior experience operating an online brokerage firm—he was a founder of Web Street Securities, which was a top-rated broker in Barron's annual ranking back in the late 1990s and was acquired by E*Trade (ticker: ETFC) in 2001. Fox decided during 2008's financial meltdown that he wanted to go back into the business, mainly because he believed individual traders were getting clobbered by institutional traders using algorithms and high-frequency techniques.

His fledgling firm (www.dittotrade.com) opened its virtual doors in a beta test last October, but will soon be more visible, thanks to a new marketing campaign (and, no doubt, articles like this one). Fox says the idea is to let average investors, who usually have better things to do than stare at a computer screen, benefit from the skills of people who are in the market every day.

Upon logging in, you are presented with a standard-looking account balance page with streaming quotes. The "Trading Pit" is where customers can place orders on their own; like tradeMonster, when you enter a position on DittoTrade, you are encouraged to set a stop-loss and a profit target. Things start to differ, however, if you connect to a Master Trader.

More: http://online.barrons.com/article/SB50001424052970203600104576299260931971154.html

 

[stockGURU]

Just a few questions that occurred to me after starting this thread:

1. Why don't some of the spruikers/trading gurus in Australia who are quite happy to charge big $ for trading "education" prove their mettle by offering a mirror trading service? Lets see how good they actually are as traders.

2. Does anyone know if any Australian brokers are going to offer a mirror trading service?

3. Would you risk your own capital to follow another traders trades?

 

[Ruby]

.......... Why don't some of the spruikers/trading gurus in Australia who are quite happy to charge big $ for trading "education" prove their mettle by offering a mirror trading service? Lets see how good they actually are as traders.

That would be interesting! I can imagine the apoplepsy if that was suggested to some of them.

 

[Gringotts Bank]

It's not any different to buying an online tip sheet.

But there's a reason why it won't/can't work, just like tip sheets. Say he puts out 20 tips per month. If you have low confidence, you will pick the 3 stocks of the 20 that do really poorly. The tip sheet makes 10% and you lose 30% - how can that happen???!! If you have high confidence (either in yourself or the tipster), then you will do well. But if you have high confidence, you probably wouldn't need the tip sheet. Tip sheets are for those who have no self confidence but have high confidence in others. But what you're paying for is confidence, which is why Port Philip Publishing dudes are so effusive and American with their advertising. They want to generate that confidence. And it works. At least it works for those who believe it. AT some point or other they will have a shocker of a run, and if you were to scroll back through their new subscribers, you'd find a whole heap of guys who have the attitude "this won't work" join just before that time. You'd also find a whole heap of guys with the attitude "this was great - time to finish" leave the service just before this time. Believe me!

 

[skyQuake]

Just a few questions that occurred to me after starting this thread:

1. Why don't some of the spruikers/trading gurus in Australia who are quite happy to charge big $ for trading "education" prove their mettle by offering a mirror trading service? Lets see how good they actually are as traders.

2. Does anyone know if any Australian brokers are going to offer a mirror trading service?

3. Would you risk your own capital to follow another traders trades?

Even with the big cap stuff you're going to suffer liquidity issues when enough ppl hop onto the bandwagon.

Come to think of it, this mirror trading is pretty much the same as giving ur money to a fund manager

 

[skc]

The experienced trader who's being mirrored is in a perfect position - he's basically legally front-running the crowd. Get a big enough following and he/she will do pretty well.

 

[tech/a]

1. Why don't some of the spruikers/trading gurus in Australia who are quite happy to charge big $ for trading "education" prove their mettle by offering a mirror trading service? Lets see how good they actually are as traders.

Ones been doing it for years.
Doesnt call it mirror trading but same.

 

[So_Cynical]

I posted about a similar phenomenon quite a few months ago...portfolio mirroring.

https://www.aussiestockforums.com/forums/showthread.php?t=20448

 

[brettdecal]

If you know what too look for in a Signal provider you can do pretty well out of it.
But like all things you need to do your home work otherwise it's no different then gambling.

Make sure you know what their trading style is, are they a short term or long term trader, do they fit your own risk profile.

The biggest thing to look for are there stats showing the full picture? Never believe the headline rate of return on an account.

Brett C

 

[brisman]

Also known as social trading, leading sites are etoro.com.au and zulutrader.com and signaltrader (which is more mirror trading than social trading).

I'm going to try these out as a plan to diversify profit/loss from my trading. Etoro is the easiest to use but Zulutrader is a bit more transparent and has more user options. Signaltrader looks more professional but has a limited number of signal providers to choose from.

I wanted to link one to my IB and IG accounts but they seem a bit limited in social trading at present. I bet that changes in the future.