Cognitive Bias
Herd Behaviour — Definition, Examples, How to Fix
Following the crowd into trades — buying because others are buying, selling because others are selling.
What it is
Herd behaviour in trading shows up as following social-media calls, copying influencer trades, or piling into the same setup as everyone in your trader chat. The crowd is usually right during the middle of a move and wrong at the extremes. By the time a trade is being widely talked about, the easy money has already been made — what's left is the late-comer chase.
What it looks like
- Buying a stock because three Twitter accounts mentioned it that morning.
- Following a copy-trading leader into a leveraged crypto position.
- Joining a Telegram-pumped breakout that has already moved 20%.
Why it costs you money
Herd-driven entries cluster at the end of moves and right before reversals. Win rate is materially lower than entries based on independent technical setups, and average loss is amplified by the crowd-driven oversizing.
How TradeSaath detects this
TradeSaath's pattern engine identifies trades taken on instruments not in your historical watchlist combined with entry-timing in the late phase of a public-narrative move.
How to fix it
- Trade only setups you can articulate without referencing what others are saying.
- Reduce social media intake during market hours.
- Use a written checklist; no entry without all boxes ticked.
- Check: "Would I take this trade if no one else were watching?"
Related
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