Common Mistakes and How to Avoid Them
Introduction
Mirrorly is a cutting-edge copytrading platform for both beginners and professional traders to copy the strategies of other traders using their own sizing and logic. While copy trading may appear easy and automatic and can be a very powerful tool, it's crucial to be mindful of the potential pitfalls to ensure a successful copying experience. Consistently copying profitable traders over time is the primary key to success. In this article, we'll delve into the most prevalent mistakes made by new copy traders and offer valuable guidance on how to steer clear of them.
1. Changing Size after Winning Run and Then Hitting a Big Loss
One of the most critical mistakes Mirrorly copy traders make is altering their position size drastically after a successful run of trades. Riding a winning streak can lead to overconfidence, and copy traders may increase their position size without fully considering the potential consequences, causing them to deviate from the trader they are copying. Unfortunately, markets are unpredictable, and even the most successful traders experience losses. If the market turns against them, the larger position can result in significant losses, which can be more substantial for the copy trader than the original trader. To avoid this mistake, Mirrorly users should maintain discipline and adhere to a consistent position sizing strategy regardless of short-term performance.
2. Not Analyzing Traders' Data and Emotional Decision Making
A lack of proper analysis of the traders you're copying can lead to two common mistakes. First, panic pausing after a losing streak: Mirrorly copy traders may become anxious when the trader they follow experiences a series of losses, and as a knee-jerk reaction, they may pause copying or even stop entirely. This fear-driven decision can lead to missing out on potential recoveries when the trader's strategy starts performing well again.
Second, FOMO (Fear of Missing Out) and re-enabling after a winning streak: On the flip side, Mirrorly copy traders might impulsively re-enable copying after seeing the trader perform well for a few trades. However, this could mean getting back on board at the peak of their performance, leaving you exposed to potential losses as their strategy may cool down.
To avoid these mistakes, Mirrorly users should take the time to analyze a trader's historical performance, risk management practices, and overall strategy before copying them. Also, set predefined criteria for when to pause or resume copying, based on thorough analysis rather than emotions.
Users should take the time to analyze a trader's historical performance, risk management practices, and overall strategy before copying them. set predefined criteria for when to pause or resume copying
3. Getting Limited in Size and Missing Out on a Big Trade
Mirrorly requires users to set account restrictions. While these restrictions are intended to protect inexperienced traders from significant losses, they may inadvertently lead to account limitations if the position sizing ratio is set incorrectly. When a trader's account becomes limited, it restricts the ability to proportionately copy the positions of the followed trader. This limitation can result in missed profit opportunities, even when the copied trader performs well. To avoid such issues, it is essential for Mirrorly users to carefully consider their account balance, maximum account limit, and the size of the trader they are following, ensuring a suitable and balanced position distribution
4. Sizing Too Big and Not Being Able to Stomach Drawdowns
On the opposite end, some Mirrorly copy traders may decide to copy traders with large position sizes, hoping for significant profits. However, this approach can backfire if you lack the risk tolerance to stomach the drawdowns that may occur. If you find yourself panicking during periods of drawdown, you might be tempted to manually interfere and exit positions prematurely, potentially turning profitable trades into losses.
To avoid this mistake, ensure that you're comfortable with the level of risk associated with the trader you're copying on Mirrorly. Choose traders whose risk profile aligns with your own, and resist the temptation to oversize your positions beyond what you can handle emotionally.
Mirrorly provides historical data regarding a traders discrete trades run-up and drawdown, so you're able to consider whether you can stomach the trading style of the trader you're considering.
Conclusion
Mirrorly's copytrading platform offers a valuable opportunity for traders to learn from and potentially profit from the strategies of skilled traders. However, avoiding common mistakes is crucial to successful copy trading on Mirrorly. Remember to maintain discipline in position sizing, conduct thorough analysis of traders you're copying, understand the limitations and benefits of the Mirrorly platform, and align your risk tolerance with the traders you follow. By following these guidelines, you can enhance your copy trading experience on Mirrorly.