second pillar: market sentiment Flashcards
who are retail traders?
individual traders from the general population who are their trading their own personal account
Usually they have the same knowledge/expertise/experience as institutional traders
what are the mistakes retail makers do to lose money?
- They do not take the market seriously, they only see it as a way of making a lot of money quickly - unprofessionalism
- They are lacking the knowledge and understanding of the market, they underestimate it - ignorance
- They are emotional in their approach, when they have wins or losses it affects directly their trading - inconsistency
- They rely on someone else to tell them what to do (signals, mentorships, etc) - lack of responsibility
- They are impatient, risking a lot to make huge sums of money - over leverage
how much money to 90% of retail traders lose in their first 90 days?
90% of their money
what is an institutional trader?
someone that works for a bank/hedge fund
has followed a rigorous financial training in university and directly at a financial institution
They are professional in their approach
they have the knowledge/experience
they manage big trading accounts
This is their living and they dedicated their life to it
how do financial institutions make money? who do they get it from?
they do that by taking it from retail traders, they are eating them
They will trick the retail traders in many ways to make them loose their trades so they can profit from them
This is the law of the jungle
why is the forex market a zero sum game?
IN ORDER TO HAVE A WINNER YOU MUST HAVE AN EQUAL LOSER
where should you position yourself in the market?
most of the time, on par with institutional traders and against other retail traders
How can you know if you are well positioned?
By following this trading plan you are trading and thinking like a professional institutional trader
Also retail traders are easy to predict, if you know their next move you can do the opposite of what they are doing
what do you do if 90% of retail traders are long on a trade because the trade is too easy/obvious
you go on short
the financial institutions will position themselves for a short
They will either just do the opposite and make the price go down or they will temporary move the price down to wipe out the retail traders and the let the price go back up if it’s in their best interest for the currency to appreciate
what does it mean to be a Hybrid
being both as good as institutional traders and free as retail traders
institutions are Powerful but Slow, retail traders are Weak but Fast
you must become Powerful and Fast
