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The Psychology of Copy Trading: Understanding Emotions and Decision Making

21.08.2023, 11:35 Uhr in Service, Anzeige
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The Psychology of Copy Trading: Understanding Emotions and How They Influence Decisions

Among investment strategies, copy trading has proven to be extremely popular over the past few years. The point is that individuals will be able to imitate successful trades made by professionals. However, it is more than just a simple copy, because psychological aspects in particular play an important role in long-term success. Emotional rollercoaster or structured copy? In the following we deal with the core topic of copy trading.

Quickly explained: This is really behind Copy Trading

Behind the term copy trading, which is also often referred to as mirror trading, there is a real-time replication of positions from other traders. Investments no longer have to be selected manually, but are simply planned based on the strategies of other people. Of course, this is not about duplicating the portfolio and the plant of neighbor Herbert. Copy trading primarily refers to successful investors who have often had success with their strategies.

The emotionality of copy trading - why it's not boring

Even if your own investment decisions are made on the basis of others, they are associated with a variety of emotions. Euphoria arises especially when an immediate profit is triggered and this creates the feeling of success. If there are declines, this quickly triggers fear of loss, especially among inexperienced traders. One's own decisions are questioned, another successful trader may be followed. Ultimately, however, impatience also plays a major role. The desire for a return that can be felt quickly often triggers impulsiveness, which then runs counter to the long-term strategy.

So the key to copy trading is to stay calm and relaxed. It is always possible for investments of any kind to incur losses. Many of these are short-term, strategies are not always designed to generate high sales immediately. Long-term strategies are geared towards long-term growth, not spontaneous profit without subsequent development.

Against emotionality and for more discipline - this is how copy trading becomes more successful

In principle, it is also possible for beginners to develop successful investment strategies on the basis of copy trading. However, parallel further training on the markets and the principles of investments have proven to be very helpful. In this way, the copy trading decisions can be reflected on again and again and compared with your own goals. It is also advisable not to go “all in” and rely on an expert. Instead, it is also worth diversifying when copy trading and spreading the investments across different assets and traders.

The measure of all things is and remains discipline, because this is the only way to achieve successful copy trading. Those who are able to appreciate the impact of unnecessary emotions are able to create a balanced approach. However, it must always be remembered that there is no foolproof strategy. Risks and investments belong together. However, once the psychological factors are understood, traders can position themselves for long-term copy trading success. Recognizing challenges, living with them and working with them are the basics for the investment to be strategically successful as a copy trade.