So my guy “Skip” has asked a question about What is a retail trader?
Here goes….
4 guys arrange to meet up for a drink, Coffee, can’t get on the top shelf as they have to be back as the misses is probably going to engage the Hadouken, rise retrace to the left side of the face.
All 4 guys are savvy when it comes to investing…What I mean is, they all have crypto.com installed on their phones and they think they are “Gs” when it comes to trading.
One of the guys gets a notification, “Bitcoin has increased 3 %” …
“Yo guys Bitcoin is moving” – Excitement is engaged, the feeling of “Missing out” is present.
“Fuck it I’m adding to the motherfucking Baaag”…
“I ain’t missing this one, ELON, Where’s the fuckin mooooon”
“If bitcoin keeps going, let’s switch it to the whiskey, forget the misses, I will be too pissed to even feel her letting loose her vector candle on me…”
The behavior above is simply 4 guys at a coffee table…Getting excited at the prospect of an asset that to them is rising and they are missing out on this momentum. The trader who understands the business knows that something is setting up.
From the above, you can safely accept that the retail trader is like a schoolboy who can get very excited at a moment’s notice…
Whatever age you are ….Even myself, If I start seeing an asset rising that I have an association with, I do have that feeling of “yeah baby”
but I know how the business works. So I am left with one thing to do.Sell my position or lock-in profits and whatever happens after that, I have no control over.
The 4 guys are all in on the same move…They maxed their weekly deposit limits: Using money they can’t afford to lose…
“Fuck it, can’t be bothered to go on holiday with her, Ill buy her a sunbed voucher instead”
“I’m gonna buy me a phat rolly” I’m a trader Biiiiiiitch”
Yes, you guessed it…The retail trader is all about instant gratification…He is the dreamer, he is the guy that can’t see any obstacles in his way…Now don’t get me wrong, you can have aspirations, goals. But in trading…Goals do not matter. The structure is valid, but your commitment to your desires cannot influence the market…
Sometimes you hear the word “Hope” in trading…Sometimes, those who profit from hope, set themselves up for massive losses as they will always hold on to “that time” a trade was in the red then went positive and they made a killing…This is a sure-fire way to burn your balance…Been there…
So the 4 guys are invested in Bitcoin…Enjoying what life will be like when they cash out…
All 4 guys are now seeing profits…They are buzzing…nothing is stopping these guys…
None of them sell…
So the market maker makes them pay…
He drops bitcoin, no different from the way it dropped today.
…………….
A quiet spell of wind passes through these 4 guys…A silence that was louder than a cemetery…
“Fuck”…What just happened….I’ve lost 90%…
All 4 retail traders…have lost everything…
See, the market has a great way of keeping traders liquidity committed to the charts…We know that in order to buy someone has to sell…How do they make the retail trader sell?
By pushing his balance to regions where he can get liquidated so the market maker can automatically initiate the transfer of the buy orders to sells…(He has to hit the liquidation points to trigger the orders set at those liquidations. E.g. if you are long, the market maker is short, your liquidation point is still an order…a sell…So when he moves the price towards your order, he buys it because your liquidation point is the sell…He profits)
So to summarise…The retail trader is emotional, irrational, (misses ain’t gonna be happy about that sunbed voucher) someone who is not in tune with what is really happening and is using the understanding of Trading theories in books on amazon to try and beat the “market maker” at his own game.
That’s my understanding of a retail trader.
Mad Love
T
