by Edward Revy » Mon Mar 15, 2010 2:14 am
Not exactly. The big players don't sacrifice their money, it would be too expensive considering the amounts they trade with.
When big players do go against the trend, the trend reverses.
Imagine that you have the power to drive prices, e.g. that few of your large orders can turn the market no matter what.
It is unlikely that you will lose even in the short term, because you know that whichever direction you want to trade, be it temporarily or in the long perspective, the market will respect it should you put in enough capital.
Now, stepping outside the imaginary world:
In an uptrend big players are capable of drawing prices down temporarily in order to get a better price for Buying in an uptrend.
(Big players would first Sell and take profit, and then later, place a large Buy order at a better price they've achieved and go with the trend).
Small players, if caught in those intended pullbacks, will have to accept the losses.
On the other hand, having too much capital in the market at any moment is not as easy as it may look.
All big players have to literally control their immense power in order to not impact the market more than necessary.
For example, when big players estimate that the market has reached its top and will most likely no longer rise in the nearest future, they prepare to reverse their orders, but they need time to do it. Unlike small investors, big players can't reverse their orders all at once, instead they heed to do it in portions in order to keep prices under control (for own safety as well).
What you can see on the chart is weeks of up and down moves with returns to key Reversal levels, where large investors change sides from Buying to Selling by taking out/putting in controlled portions capital.
See the screen shot below with highlighted areas, where the big money were involved.
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