Herd behavior – Herding bias occurs when traders follow the majority’s actions rather than their own analysis. This “crowd mentality” leads to buying when prices soar or selling during panic. In practice, herding is why many buy after a breakout simply because others are doing so. In algorithmic trading, blindly using popular signals without validation can mimic herding. Herd behavior is described as the tendency to mimic the majority’s financial actions. It explains market bubbles and crashes: when everyone buys (or sells) because “others are doing it,” fundamental analysis is ignored. Robust robot design mitigates herding by testing strategies independently of popular trends.

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