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They Them Us Institutions Smart Money Banks Hedge Funds
You hear a lot of US (retail traders) versus THEY/THEM (banks, big money, institutions, etc.). Usually phrased something like THEY run price up/down to take out US out. Liquidity grabs, stop hunting, etc. Makes sense in theory, but I have to wonder... IF we are such a small percentage of the trading action (and I believe we are), then is this really what's happening? Is it really this big conspiracy where all the "big money" is collaborating through elaborate, secret wink/nod code to manipulate price action to take "us" out? If that is the case, then how did they make money 5-20 years ago when the percentage of "us" was very much lower? I find it hard to believe that the "big money" has formed some type of shadow alliance to attack "us". I wonder if it is not more of the "big money" fighting and trying to out smart each other and "we" are just collateral damage. I don't think we are the target at all. There is so much extreme competition in the big money industry. These investment bank analysts and managers would fight each other to the death. Do you really think firms are going to shake hands, team up, and be content with dividing up the small percentage of gains they can get from retail traders? I am not disputing that there are key levels on the charts where action and reversals take place. I agree with technical analysis. Just not convinced of the premise in regard to retail traders. I don't know. Just a thought I had.
The idea that the Big Money is manipulating the market to get the Little Guy will never die.
It's too convenient as an explanation for why you don't do well. It also provides a good living for trading gurus who will explain the secrets to you, for a price.
There's also no doubt that the big players do strongly affect the markets, and of course they are not doing it to benefit anyone else, so a non-paranoid case can also be made about it being important to understand what they are doing.
But the appeal of "it's not my fault" is huge, and it explains away all of a person's errors and misjudgments that they could and should be focusing on to get better as a trader.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
But I want to add, that (from my uninformed standpoint) also all participants that can't play the game of the infinitly deep pocket can be considered as the "we" - so it's not about the average Joe's ratail account, but funds, companies, commercials, speculators whose liquidity is welcome for the real big boys.
In order for a trader of any size to make handfuls of money there needs to be a trader or group of traders that take the opposite bet. And that trader on the opposite side needs to hold onto the losses or pass the position off to somebody else that will hold losses as well. It doesn't really matter what size trader they are, sometimes the rich guys have bad days also and get caught on the wrong side and don't get out.
One of my mentors used to joke at me whenever I said something like that: "Yes, sure, as soon as Zvi enters the market, an alarm goes off, and Morgan Stanley calls up J.P Morgan to devise an action plan to steal your money".
An analogy that may be useful:
Fact - cars occasionally run over turtles crossing the road.
The cars don't "target" the turtles.
They don't even care about the turtles.
The cars are just driving, minding their own business.
The big money is playing THEIR game with THEIR intentions (which are completely different from yours. They don't trade "against you"). They've played it before you came and will continue when you're gone.
Just realize you are a turtle and learn to beware of cars.
I agree with the points you are making and the comments of other people: the retail guys are non-existent for the big guys.
Story time: I used to work for a mid-sized European buy-site firm.
The portfolio managers would have a weekly meeting at Wednesday morning to formulate a shared global vision and made the portfolio adjustments and trade decisions in the afternoon.
At one point they realized their trades were visible to other players (like sell site firms) and were taken advantage off.
After that, they spread the trades over the week.
So it is a dog-eats-dog game and all sizes try to get what they can....
(Mike, why do we have a lama here and no dogs as smileys?)
