Tradency Mirror Trader (Our review)

Tradency invented mirror trading in 2005. The company is positioned primarily as a technology provider for forex brokers, so you cannot open a demo or live account on Tradency's website. You must go through one of their forex broker partners, such as AvaTrade (click here to open a demo account).

Tradency's Mirror Trader platform is available in demo or real mode. It provides you with the usual trading tools to analyse currency pair charts, but most brokers offer these very same features. The real benefit that Tradency offers is that you can copy a hundred forex strategies. You can also trade manually and view the percentage of purchases and sales of the other Mirror Trader platform users for each currency pair.

Tradency's trading strategy suppliers

Forex strategy providers are not obligated to emit their trading signals from a live account, but their strategies are tested by Tradency for 1 month via a minimum of 30 trades before being added to Mirror Trader's ranking. Obviously, it would be preferable for the strategy providers to use real accounts, or at least for us to be able to know if these traders are using a demo or a real account.

The quality of traders and their strategies is important when evaluating the effectiveness of a social trading network. As a matter of fact, most of Tradency's Mirror Trader strategies are expert advisors (EA). In other words, they're programs (or "trading robots") that automatically implement strategies based on rules that are pre-defined by the developer. Apparently, the quality of these strategies is not homogenous, a few of them are effective while others are quite bad.

The strategy providers are paid for clients who copy the signals with a real account. There are two payment structures, which depend on the broker that is used:

• Compensation based on trading volume: each trading strategy provider receives between 0.15 and 0.30 pips (depending on the broker) for each short or long trade copied by a subscribing account. Profits = (number of subscribers) x (number of trades) x (commission).
• Fixed compensation: for every active user that uses the strategy at least once during the month, a strategy provider will receive between $3.75 and $5.00 (depending on the broker) - but this amount is shared with other strategies; if the user uses 5 strategies during the same month, the compensation is divided by 5.

Compensation isn't based on the success of a strategy (which is the case with other social trading and mirror trading networks). However, when a strategy loses money users stop copying it.

There are quite a few Mirror Trader strategies that have positive historical returns. The strategies rely heavily on automated systems (EAs) instead of human traders and each strategy is linked to a single currency pair; you will therefore need to spend a bit of time monitoring the evolution of the strategies you've selected and change them if necessary. An experienced professional trader can use multiple strategies on different currency pairs, basing his selection on market conditions; Tradency's strategies are available for each currency pair, it's up to you to choose the combinations you feel are best.

How much does it cost to use Tradency's Mirror Trader?

Tradency is compensated via a commission on each trade or a flat monthly fee it charges each broker. Some brokers will therefore charge you an additional fee per trade to use Tradency's Mirror Trader. (There are no extra charges if you use the AvaTrade brokerage.)

Finding strategies and risk management

To search for a strategy to copy that matches your trading style, Tradency provides you with a variety of filters and a complete history of past and current trades. In this respect, Tradency is totally transparent, which is not the case with all mirror trading networks. You can even download data to Excel to perform your own analysis.

However, drawdown is calculated solely in terms of the funds in your account and completed trades, it doesn't take into account open trades. To assess the risk of a strategy, drawdown must always be calculated by measuring the maximum loss of open positions. A serious investor will not want to copy a strategy that regularly risks a margin call, even if it posts a positive performance. The drawdown of open positions is also very important to combine multiple strategies on a same account and to manage overall risk.

The settings available to manage your mirror trading account allow you to define a fixed number of lots for each strategy, the maximum number of trades and the maximum loss you will tolerate. You can also view open positions and close them from the platform at any time.

RoboX, a tool that manages trading algorithms

RoboX is a solution that solves a problem found in mirror trading systems: it offers a simple but powerful tool to manage investments based on trading algorithms. It also prevents the human tendency to follow a leader in large number so as to avoid problems linked to a lack of liquidity, especially for scalping strategies that rely on capturing a few pips at a time.

From the user's perspective, all you have to do is log on to the website, answer a few simple questions about your goals and your risk appetite and the system will present you with a basket of tailored strategies and recommendations to diversify your money across multiple strategies. The whole process takes about thirty seconds. For those looking for more control, positions can be closed manually at any time and a switch is available to put the system into user-approval mode to execute the signals.

This system is ideal for investors seeking exposure to the foreign exchange market but who don't have the time or desire to learn or adjust the strategies they are following when market conditions change.

Social features

Tradency doesn't offer any social interaction features on its Mirror Trader platform. The only interaction you have with strategy suppliers is one-way, you're able to read the strategy description, and that's it. Some are detailed and useful, while others are non-descriptive and useless. Users cannot comment on their experience with a strategy, but you can actually see the amount of money that is invested in each strategy.

Pros:

• trade history information is available and transparent
• risk can be managed separately for each strategy
• you maintain control of trades, they can be closed via the Tradency interface
• demo accounts are fully operational and free (although they depending on a broker)

Cons:

• drawdown is calculated in relation to completed trades, it doesn't take into account open positions
• no social interaction is possible with strategy suppliers or other investors
• most brokers charge an additional fee for each trade
• strategy providers are not required to trade from a real account
• each strategy is linked to a single currency pair