Many new traders look towards trading mentors to help guide their way when they first begin to trade. Most often new traders begin their trading journey by copying another trader’s trades.

This seems like a great idea, but when you really think about it, how come the new trader never makes as much money as the trader they are shadowing?

If you polled many members in a legitimate trading room, most of them are probably not making the same returns as the traders running the room.  In my opinion, this is because shadow trading does not actually produce good learning opportunities, enabling a new trader to achieve the same success as the trader they are shadowing. For arguments sake let’s remove the possibility that results are fabricated, (this is another topic altogether) and assume that the trading room records are accurate and that trades are being make on screen and in real time.

FIVE SKILLS EVERY TRADER NEEDS TO SUCCEED

Shadow trading can’t address five essential skills that every trader needs to learn.

  • Trading by copying another trader may sound like a good idea, but this only develops a reliance on copying as opposed to feeling empowered to find your own trades. Shadow trading never addresses the skill of finding and assessing trades without the guidance of a moderator.
  • Market analysis is just as important as learning trade set ups, but unfortunately shadow trading often does not include learning how to read the markets. Without the ability to analyse the subtle nuances of the markets a trader will never be able to trade independently.
  • Shadow trading involves trusting and relying on someone else to make decisions for you. The decisions you make as a trader while trading develops your confidence and problem solving skills.
  • New traders need feedback, but this is not available to shadow traders. When a trader is merely copying trades, they are not receiving specific feedback that they require. Shadow trading only develops the ability to copy not think critically and develop their own opinions.
  • Trading is an art and a science. It isn’t enough to follow steps and expect success; there are nuances about the feel of individual markets that can only be developed with time themselves in the markets. Shadow trading will only develop a traders set ups (the science) but lacks the ability to develop the art.

THE BOTTOM LINE

New traders would benefit from closing the feedback loop and critically examining the benefits of shadow trading for themselves. If you have begun trading because you wanted to learn to trade on your own, make sure you are developing skills in the markets that will allow you to do this. Critically weigh for yourself whether copy someone else is really the best way to learn to trade.

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Read another story by this author here.

The Path To Profitable Trading: My Aha Moment.