Herd Mentality
Following the crowd into a trade because "everyone else is doing it" rather than because your own analysis supports it.
Herd mentality is the tendency to copy the actions of a larger group, abandoning independent analysis for the perceived safety of consensus. It is deeply human — in evolutionary terms, following the herd kept you alive. In markets, it often kills your account.
Herds are most dangerous at extremes. When everyone is bullish, the crowd is already fully invested — there are no new buyers left to push price higher. The herd move is often the last move. Late herd entrants are the exit liquidity for early entrants.
Independent analysis, a contrary reflex ("why is everyone so sure about this?"), and sizing positions based on your own conviction rather than social proof are the antidotes. The most profitable trades are often uncomfortable precisely because the herd disagrees with them.
Example
A Reddit thread goes viral about a stock "going to the moon." Thousands pile in based on the thread. The stock doubles over three days. Then the early holders sell into the herd's buying. The late arrivals who followed the crowd are left holding losses.
Related Terms
Capitulation
The emotional point where holders give up and sell en masse — often the true bottom, right before the recovery most of them miss.
IntermediateConfirmation Bias
The tendency to seek out information that supports a trade idea you already hold and dismiss evidence that contradicts it.
IntermediateEuphoria
The dangerous overconfidence that follows a strong winning streak — the feeling that you can do no wrong, right before a major loss.
IntermediateFOMO
The anxiety that everyone else is profiting while you sit on the sidelines, driving impulsive entries at the worst possible price.
BeginnerFUD
Negative sentiment — often spread deliberately — that shakes weak hands out of positions before the real move higher.
Beginner