Hello friends, readers and colleagues! Today we’ll talk about why most traders get stops… There are also successful deals. But when trying to trade with medium-term targets, most market participants get stops. We are talking about systemic trading. Those speculators who trade without a system usually have near zero results. That is, the profit does not exceed the loss, and this is at best. And in the overwhelming majority of cases, haphazard trading simply brings losses. But today we are not talking about this method of trading. What most average traders don’t notice when they open trades? Moreover, quite a few of them have good trading experience, but they still catch moose.
Buy cheaper, sell more expensive
This is how everyone sees successful trading in the markets. Indeed, it is so, but not everyone succeeds in acting this way. And the concept of “expensive” or “cheap” is rather arbitrary. If now the price of the eur / usd pair is $ 1.21472, then it is expensive for someone to buy. But in January 2018, everyone was buying the pair as the price was considered attractive. And so with any marketable asset. The current price may be attractive for someone, but too expensive or too cheap for someone. Ordinary traders cannot influence price formation. They adjust to market movements in order to try to make a profit. Big business can reverse the price, but it tries to act imperceptibly. It is big business that buys at a lower price and sells at a higher price.
Purchase at a bargain price
Large players are in no hurry to get instant profits. Unlike ordinary speculators, they wait for the right moment to make a deal at a bargain price. When the price moves down, all market participants try to join this movement. But the moment big business considers the price attractive, the picture changes. A large player buys out a large volume. Thus, it stops the downward movement. But a large player cannot use all of their money, as this will reverse the market. The price stops and buyers believe that this is a reversal and enter the market. The more buyers there are in the market, the faster the upward momentum.
Shaking traders out of the market
Almost all market participants act in the same way. Fearing to miss a move and miss out on profits, they try to tap into strong price impulses. If the price moved down for a long time, and then a sharp upward impulse began, most consider this to be the beginning of a reversal. Trading positions are opened upwards, the stop-loss is set for the nearest local minimum. But the price goes up for a short time and reverses again. Sellers believe that the correction is over and enter the market. They also put stops for the nearest local maximum. The price goes down, renews the previous low. Thus, activating the stops of buyers. And then big capital comes into play. He buys out the entire offered volume, thereby turning the market up again. An upward movement renews the previous high, knocking out sellers’ stops. The price turns down again. Once again, by updating the minimum, a large buyer achieves his goal by buying the volume he needs. And only a few traders who have acted in the same way have made a profit. The rest of the traders were content with the loss they received from the stop loss.
June 4, 2021