I wanted to follow on our the previous post with this one, explaining a little more how MM move the markets.
We touched on the market reacts and picks on the popular kids, and that errs on the side of the dreaded “manipulation”. But as the title suggests the markets aren’t manipulated, in fact they do exactly as the market makers intend.
Let me give an example. I posted this from my notes a few years ago. to anyone who uses trend lines and nothing else to trade, repeat after me.
“I believe I can outperform some of the smartest, most well equipped investors in the world with a millenia worth of collective experience by drawing lines on a picture that even a child could draw.”Anonymous
What this refers to isn’t drawing lines on a chart if you have some way of doing it in an unpopular way. I’m talking bear/bull flags and the dreaded triangle. While these have some value to help you determine when a move might occur, it usually doesn’t do what you think it will. At least not for long.
See as stated above the market maker can move the market and paint the flag, but he’s not intending to pump BTC by $1000 the liquidity required is too much. But what if he could paint a flag that’s so obvious everyone rushes to long or short it.
Now the market is suddenly being stacked in favour of one side as the popular kids believe the flag will play out. The market maker just needs to fake it happening for #fomo to kick in, pumping a large number of shorts or longs into the market with tight stoplosses. Its a sure thing afterall isn’t it?
Then it reverses the other way. The market maker just manipulated you and everyone else who considered that flag a sure thing. All they did was paint an expectation to get the liquidity they required to move the market where it naturally wanted to go. It’s that simple.
The MM won both ways again, catching over leveraged shorts in one direction then getting the liquidity needed to really tank the market once enough longs are open, pushing the price down with ease.
Now I will note, this isn’t always the case. Dumb money would not keep “trading” if they constantly lost. Rather its more like a casino.
You let the “dumb money” win every, about 1:5 times to keep them coming back.Aevir
Scientifically most traders will believe they will win and keep investing up to 4 losses after a big win. Just like the gamblers at casinos. But if you won 4 and lost 1 trade, you are already 80% more profitable than those who try and play the easy game.
This is why most retail investors fail, they simply aren’t interested in learning how to trade, but rather follow the obvious cause its easy. So stay safe, look at the overall picture and always question something that is far too obvious.
There is no such thing as easy money.