Thomas_ Anderson#34

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How does herd behavior shape forex markets?

Herd behavior occurs when traders follow the crowd, buying because everyone else is buying. Institutions exploit herd sentiment, entering positions before retail crowds. Retail traders pile into trends late, often exiting at the worst time. Benefits: aligning with the herd can capture momentum. Risks: being the last in leads to losses when the herd reverses. Example: the surge in USD demand during crises often reverses sharply once panic fades. Successful traders learn to recognize herd-driven extremes and position contrarian when risk-reward skews.