The Copy Trading Trap: How Relying on Others Can Limit Your Growth as a Trader
Be the independent, self-made trader you set out to be
“All highly profitable traders I’ve known in my 45+ years of market speculation have had a personalized trading approach of their own design. I’ve known nobody who has built trading wealth by shadowing another trader’s maneuvers.” – Peter Brandt, Professional Trader
There are a ton of services out there that will take all the hard work out of trading for you. Signals services that spoon feed setup after setup. Expert advisors that use clever algo’s to trade while you sleep. There’s even a service that will pass your online prop firm challenge for you. The same company will even keep trading for you after passing (for a 20% management fee of course).
Putting aside any potential returns (or losses) these “shortcuts” may achieve, these services create a huge problem for novice traders. Most new traders are unaware that when starting out in their trading journey, the clock starts ticking. This clock continues ticking as you cycle through various unprofitable strategies. It ticks on as your family and friends start to question why you’re wasting your time and money on a fruitless endeavour. It ticks and ticks as you struggle to balance your time between trading and work that provides the income to keep going. The hard truth is that you have to become profitable before the clock runs out, or it’s game over.
While taking the route of copy trading or using signals services may feel like you’re getting a headstart, it’s really just eating into that precious, finite time you have to find your success as a trader.
The lure of copy trading
When I first started trading, I’ll admit I did what many others do when they realise they’re in over their head – I copied from other traders who appeared to know what they were doing. Twitter was the obvious choice, given it was free.
I would copy the trades of a crypto trader who’d been recommended to me by a friend. “This guy’s calls are never wrong!”, my friend exclaimed, as my face lit up with the thought of easy profits.
I began copying his trades. If he said he was going long, I would go long. If he went short, I went short too. This new approach to trading was a lot easier, and less stressful than the rough time I’d been having trying to trade independently. And it made me some decent profits in the beginning.
But I didn’t understand why the trades worked. There was never much explanation for each setup. While I convinced myself I was just learning the ropes before going back to trading on my own, in reality I was learning very little.
The profits didn’t last long. The strategy soon hit a period of drawdown, and after taking a few losers in a row I began to doubt the whole approach. A couple more losers and I decided enough was enough. I gave up on the whole idea of copy trading my way to success.
The truth was, the whole time I was copy trading I still felt like a real trader. I calculated position sizes, placed orders, and watched charts. It felt good. I told friends about my trading and liked the way being a trader sounded. Only it was all bullshit. I was as much of a trader as an Elvis impersonator is Elvis. I was just going through the motions of trading, but when it came to finding setups, taking trades, and even drawing levels, I relied on this other trader to do all the work for me. And in the process, I was missing out on all the learning experiences that you can only get when you trade for yourself.
There are no shortcuts
We copy the trades of others because we lack confidence in our approach. The market is a scary place. Not only can it take your lunch money and humiliate you, but it can empty your entire bank account if you’re not careful. It’s no wonder we look to confident traders on X (formerly Twitter), or signals services, to hold our hand and protect us from this bully. But if we never face this bully alone, we never develop the skills necessary for success.
I wasted over a year of my trading journey copying trades. It was only when I stopped copy trading and began taking my own trades, that the real learning process began.
Many signals services sell themselves as educational; that copying their professional traders will show you the ropes and soon you’ll be doing it all by yourself. Only that’s not really how it works.
If you were learning how to be a waiter, then shadowing like this could probably teach you how to do the job. But trading is a lot more complicated.
I spent five years in medical school learning how to be a doctor. Five years of book learning, shadowing other doctors on clinical placements, and endless theory and practical exams. Yet when it came to my first job as a junior doctor, it was still a steep and scary learning curve. There were so many situations I encountered that I had no system or framework for dealing with. It was only through experience that I could really begin to develop my skills as a doctor. And I would have never developed those skills if someone had been holding my hand the whole way and doing all the work for me.
If you want to learn how to be a trader but are always being spoon-fed exact setups, stop losses, and take profits, you’re never going to have the experiences that develop your skills as a trader.
You have to know what it feels like to stop out at the exact low of the day, and to feel the agony of knowing that you were the one who decided to place your stop there.
You have to experience what it’s like to take five winners in a row and see firsthand how your overexuberance begins to impact your trading process negatively.
You have to know the pain of being in a 20% drawdown and questioning if your strategy will ever work again.
And you have to experience the endless frustrations and mistakes you will make day in, day out, as you inch closer to success as a trader.
Take your trading into your own hands
People get into trading because they want to become traders. No one thinks to themselves “One day I’m going to become a wildly successful copy trader”. Yet many get stuck in the pseudo-profitable purgatory these services can offer, squandering their potential because they lack the confidence to trade for themselves.
If this sounds familiar then don’t be ashamed. It’s so common it’s pretty much a rite of passage. How else could the proliferation of “social trading” have occurred?
But know that there are services out there that can help you become the independent, self-made trader you set out to be. OddsRadar is one of those services. It sends traders probabilities, instead of signals, so you can trade with more confidence knowing when the odds are in your favour. And with each potential setup it gives a detailed breakdown of the price action to help you understand why markets move the way they do.
But it won’t derail you from your journey to becoming an independent trader as you’ll still have to make all the decisions. What timeframe will you use as your “trigger timeframe”? How will you enter the trade? Where will your stop loss and target go? How will you manage the trade? These are things you’ll still have to figure out for yourself, and in doing so you’ll continue on your journey to becoming a real trader, and not just another copy trader.
Owning the results of all your decisions can be brutal when things are going badly. Stopping out prematurely because you put your stop in a dodgy place. Trying to run trades too far and taking losers when you should be taking winners. Trailing your stop too tightly and getting taken out before the trade goes straight to target. And knowing that there is only one person responsible for these errors.
But owning the results of your decisions can be life-changing when you finally start to crack the code and make consistent profits all by yourself. Price coming within one pip of your stop but then going all the way to target. Trailing your stop perfectly so you bank a winner instead of a full loser. Taking profit at the exact high of day. And knowing there is only one person responsible for your success.