the entry and exit of large amounts of money
Minimizing Trading Risk: Understanding the Exit of Large Amounts of Money in Market Trends
One of the main goals of traders is to minimize trading risk by reducing the likelihood of factors that could cause losses in a trade. A crucial factor in this is understanding the exit of large amounts of money in market trends. By analyzing the flow of money in and out of the market, traders can better anticipate price movements and make more informed decisions.
Traders aim to reduce risk by understanding the market dynamics, particularly the exit of large amounts of money. Learn how to identify key tension levels and equilibrium points to minimize losses and optimize your trading strategy.
Introduction: Minimizing Risk in Trading
One of the main goals of traders is to minimize trading risk by reducing the likelihood of factors that could cause losses in a trade. Understanding the behavior of large amounts of money entering or exiting the market is essential to navigating price trends effectively.
The Role of Money in Market Movements
Consider the image below: In Range 3, due to a lack of money in the market, the absence of effective money increasingly favors sellers. As observed, the financial and psychological stubbornness of traders in the downward direction gradually decreases (c > b > a). This indicates that fewer effective traders are actively participating, which prevents the price from experiencing a significant decline.
When comparing the slopes of legs b and c, we see that traders' psychological resistance in the selling direction diminishes. Not only did they hesitate to spend more money, but they also began spending less, requiring more time to be convinced to act in the selling direction.
Key Indicators of Money Exit and Trend Reversal
At the end of movement C, a bullish candle forms, absorbing all sell limit orders in the area. This occurs when:
There is generally no effective money in the market.
Traders' financial and psychological stubbornness in the selling direction is weakening.
A decline reaches a tension area, unable to continue further.
For traders, identifying the exit of large traders and the end of a trend is not always crucial. Sometimes, an exit strategy is based on the end of a movement or when reaching a significant tension level.
Recognizing the Exit of Money in the Short-Term
In the short term, the exit of money often manifests through the filling of a movement and a state of equilibrium. In the final 2-3 candles of a movement, if the price does not experience worse levels and the candles' closes are very close to each other, it indicates a balance has been reached. This is a key point where money exits the market without causing an immediate trend change.
Mastering the Art of Counter Trades
Once traders have acquired a certain level of skill, they can recognize these equilibrium points even without viewing market text information such as the market book or order data. By observing the market’s state of indecision and struggle between buyers and sellers, traders can open counter trades when liquidity is exiting.
Observing Market Patterns: Signs of Decreased Trader Determination
As price progresses, projections (price throws) decrease while depths increase. At the end of significant swings, candles with long shadows or Engulfing patterns emerge, signaling that traders' financial inclination towards the trend is weakening. These signs indicate that new money is entering the market more cautiously and traders’ determination is decreasing.
Tension Levels and Trade Execution
Tension levels are crucial for traders. Executing trades at these levels minimizes risks and increases the probability of success while reducing costs. If a trader overlooks these levels, they may face higher-risk trades with lower chances of success.
Large traders' money is gradually exiting, and over time, other traders are also liquidating their positions. Towards the end of the trend, it is the money of small and retail traders that drives the price forward (those who entered the market late and used technical tools to identify the trend).
In swings B and C, part of the money from large traders exits. They usually do not liquidate their trades all at once, as this would create a large candle. Just as they entered the market gradually in multiple stages to avoid attracting attention and to keep their average purchase price low, they follow the same principle when exiting.
Money Inflow and Market Direction
In the chart above, considering the three points mentioned, along with the bullish candle that is not large enough to be inconsistent with the market's general behavior, we can conclude that money is entering the market. As long as the money inflow continues and follows the trend principles, we expect price movement to continue. This could either lead to the price reaching an opposing framework level or a correction that retraces more than 60% of the previous extension, potentially becoming a new extension in the market.
The Role of Retail Traders Towards the End of the Trend
As large traders gradually exit, the money of smaller retail traders, those who entered the market later and used technical tools to identify the trend, begins to push the price forward. In swings B and C, we can observe that part of the large traders’ money exits. Unlike retail traders, large traders do not liquidate their positions all at once, as this would create noticeable price movements. Instead, they exit gradually, following the same principle they used when entering the market in multiple stages.
