1. Reasons for signal providers
Many well-ranked and famous traders on platforms are actually gamblers. For instance, the official leaderboard from a few days ago shows a trader ranked 4th, but after long-term following, it ends in a margin call. It really feels like there are no great generals in Shu, only amateurs everywhere.
To determine whether a trader is reliable, one needs to deeply understand their trading style, risk, capital management model, and historical maximum drawdown.
Many signal providers even manipulate their own margins casually to endure losses and earnings. If you are lucky enough to withstand it, but the copy trader fails to timely add positions, it will lead to a disaster.
From my observation, 95% of signal providers are amateurs in the long run.
2. Reasons for copy traders
Many people are eager to recover losses and are attracted by those '7-day multiplies' achievements. Short-term high returns come with high risks + luck. Such strategies often rely on heavy positions, enduring huge risks to seek high returns. In the long run, a margin call is almost a high-probability event.
Mindset collapses too quickly, without proper psychological preparation to face short-term pain (drawdown). The example of the 'God hand' from a few days ago is the most typical, being heavily criticized after a 10% drawdown.
Every trading strategy has a normal drawdown period (for example, a loss of 10%-30%). When a copy trader enters and encounters a decline, they immediately panic. Afraid of losing more, they quickly cut losses and run!
Trading requires time to 'endure' to generate profits, but many people think, 'If I follow today, I'll double tomorrow.'
Final profit = Total profit - Total loss
A few suggestions for those who want to profit through copy trading
Rational selection of traders (stable) + Strict risk control (no losses) + Patient execution (endurance) = Possibility of profit from copy trading