Bandwagon Effect in Trading

The Bandwagon Effect refers to the tendency of individuals to adopt certain behaviors or strategies simply because others are doing so. In trading, this can lead to herd behavior, where traders follow popular strategies like ICT or SMC without fully understanding their mechanics.

Formula:

Herd Behavior Index = Number of Traders × Market Influence Factor

Where:

• Number of Traders: The total number of traders following the trend.
• Market Influence Factor: A multiplier representing the impact of the trend on the market.