Why Copying Others’ FX Trading Strategies doesn’t Work

When you’re not getting consistent results with the trading method you’ve developed in FX, it’s natural to want to mimic the strategies of successful traders.

Even when I was struggling and losing money in FX, I found myself constantly trying to copy the methods of successful traders.

However, the results remained the same, and I continued to experience losses.

So, why doesn’t replicating someone else’s strategy lead to stable results?

In this article, I’ll share my insights based on my own experiences.

The reason copying someone else’s strategy doesn’t work

The reasons why mimicking someone else’s strategy doesn’t yield results include differences in:

– Specific details of the strategy
– Trading timeframes
– Market perception based on experience

Specific details of the strategy

The first reason why copying a successful trader’s strategy doesn’t yield results is the differences in the finer details of the approach.

For example, let’s say the successful trader’s strategy involves using retracement selling during a trend.

And when you actually try to copy that and make an entry, you end up with a stop-loss while the successful trader doesn’t.

When situations like this occur, it’s common to think, “Huh? Why is this happening when I’m doing the same thing?” or “This strategy doesn’t work!”

However, when you look at the finer details, you’ll realize that you aren’t actually copying in the same way.

For example, when you compare the two scenarios, you can see that the way the price retraces before reaching the entry point is different.

First, if you look at the one that’s working well, you’ll notice that it takes its time to retrace.

In other words, it retraces neatly in line with Dow Theory principles.

In trading, not only price adjustments (vertical axis) but also time adjustments (horizontal axis) are essential.

When both of these align beautifully and the price movement follows Dow Theory principles, the majority of market participants can conclude that “Dow Theory is working beautifully.”

As a result, when rates approach significant resistance, those who are buying against the trend ( contrarian buyers) might think, “It looks like selling pressure might emerge from here, so I’ll take profits for now,” and they proceed to take profits near the resistance level.

On the other hand, those who are looking to sell also act when rates approach the resistance level.

They assess the situation and think, “This is likely to reverse from here,” and they engage in selling retracements near the resistance.

Therefore, near the resistance level, you have both:

– Closing of long positions (selling)
– New short entries

These two selling activities lead to a decline in rates, making it easier to follow the trend and go short.

On the other hand, those trading against the entry often experience strong and rapid reversals as they approach the resistance level.

When the price retraces in this manner, contrarian buyers often think:

– “Oh, it retraced strongly in a V-shape.”
– “The bullish momentum is strong, so it might go higher.”

As a result, they consider extending their unrealized gains without taking profits yet.

Meanwhile, those looking to sell may think:

– “Oh, it retraced strongly in a V-shape.”
– “The bullish momentum is strong, so let’s wait and see before selling.”

They may choose not to enter new short positions at this point.

Furthermore, in such situations, even those who have been selling from higher levels might think:

– “Since this strong V-shaped retracement, maybe I should take some profits…”

And they decide to close their selling positions.

As a result, even when rates approach the resistance level, selling pressure doesn’t come in, allowing the price to continue rising.

In this way, even with the same retracement selling strategy during a downtrend, differences in the finer details can cause copying a successful trader’s approach to often not work as expected.

Trading timeframes

In the case of FX,

– Oceania hours
– Asian hours
– European hours
– U.S. hours

are distinguished, and market dynamics vary during each of these timeframes.

As a result, even when using the same trading strategy, there are “favorable trading hours” and “less favorable trading hours.”

Consequently, even if you use the same strategy as a successful trader, if that trader predominantly trades during European or U.S. hours, and you focus on Asian hours, your results will naturally differ.

Therefore, when copying a successful trader’s strategy, it’s essential to be aware of the trading hours they operate within.

If you’d like to learn more about market movements during different timeframes, you can refer to the following article.
FX Time Zone Characteristics: Trading Tips and Cautions

Market perception based on experience

When trying to copy someone else’s strategy without success, this aspect plays a significant role.

Naturally, the difference in experience between successful traders and others is substantial.

Experience is one of the most critical factors in achieving consistent results.

In essence, a trading strategy involves consistent entry and exit points. However, even within this consistency, intuitive factors come into play, such as:

– “In this situation, it’s better to hold off because it’s prone to losses.”
– “This scenario deviates slightly from the rules, but there’s a high potential for profit.”

In such cases, even when trying to copy a strategy, the impact of market perception based on experience can lead to significantly different outcomes.

For example, in the previous trading scenario, one trader was able to take profits, while the other faced a stop-loss.

Looking at these trades through the lens of Elliott Wave analysis can provide further insights.

First, when examining the wave pattern of the successful trade, in my counting method, entering during a retracement of the 4th wave.

Consequently, it’s a point where the 5th wave potential exists, making it easier to follow the trend after the entry.

On the other hand, when analyzing the wave pattern of the unsuccessful trade, the entry was made after the completion of the 5th wave.

Consequently, it’s in a state where a trend reversal is more likely.

This can also be attributed to technical differences, but many successful FX traders have an intuitive grasp of this wave count.

In this way, not just with Elliott Wave analysis but throughout their entire trading approach, the market perception of successful traders is integrated into their strategies.

Therefore, differences in these aspects also contribute to the difficulty of achieving success when copying their methods.

Treat a trading strategy as a guideline.

When you look at successful FX traders, it may seem like you can replicate their strategies to achieve success.

However, as mentioned above, it often doesn’t work out as smoothly in practice. Therefore, it’s better to view their strategies as references rather than strict templates.

One approach I used in the past was to start by observing a successful trader’s strategy and roughly determining, “It might work like this.”

Then, I would use validation tools to backtest the strategy.

By examining the results and making improvements along the way, I repeated this validation process tirelessly.

Through this process, the essence of the successful trader’s strategy gradually becomes clear, and, most importantly, I end up with an original strategy tailored to my own style.

So, instead of directly copying a strategy, it’s more effective to use it as a reference and validate it. This approach allows you to achieve stable results more quickly.

If you’re interested in learning more about the validation methods for creating a trading strategy, you can refer to the following article.
Effective Validation Methods for Profitable FX Strategies

Summary

When you see successful traders in FX, it’s natural to be curious about the strategies they use and want to copy them.

However, even if you try to copy them, replicating their strategies perfectly can be challenging.

In that case, it’s much more effective to use their strategies as references, continuously validate and adjust them, and eventually create a strategy that suits your own style.

This way, you can achieve success much faster.