Summary of Two Reasons Why Copy Trading is Unprofitable
1. Reasons Related to Signal Providers
Many traders who rank high on various platforms and are well-known are actually gamblers. For example, just a few days ago, the official leaderboard showed someone in 4th place, but following them for a long time led to account liquidation, giving the feeling that there are no great generals in Shu, only low-level players everywhere.
To determine if a trader is reliable, one needs to deeply understand their trading style, risk management, capital management model, and historical maximum drawdown.
Furthermore, many signal providers can be unscrupulous, casually adjusting their margin to hold onto trades and absorb losses and profits. If you are lucky enough to hold on, but the copy trader does not timely add to their position, it could lead to a disaster.
From my observations, 95% of signal providers are inexperienced in the long run.
2. Reasons Related to Copy Traders
Many people are eager to recover their losses and are attracted by those “7-day multiple returns” performances. The short-term high returns come with high risks + luck; these strategies often rely on large positions and take on immense risks to achieve high returns. In the long term, liquidation is almost a high-probability event.
Mindsets collapse too quickly, as many are unprepared to face short-term pain (drawdowns). The recent example of a particularly fortunate trade that faced a 10% drawdown and received heavy criticism is quite typical.
Every trading strategy inherently has a normal drawdown period (for example, a loss of 10%-30%). When a copy trader enters and immediately encounters a decline, they panic. Fearing further losses, they quickly cut losses and exit!
Trading requires time to “nurture” profits, but many people think “if I follow today, I’ll double tomorrow.”
Final Profit = Total Profit - Total Loss
A few pieces of advice for those looking to profit from copy trading:
Rational selection (stability) + Strict risk control (survival) + Patient execution (endurance) = Possibility of profit from copy trading