Friend,
It is completely wrong to say that operators loot retail traders. Because in reality retail traders get looted due to their trade psychology.
There are two reasons for this.
1) Fear
2) Greed
Due to these two emotions, retail traders get looted.
Let us see a small example.
Suppose a retail trader analyzed that the price of XYZ stock will go from 700 to 710. In such a case, he buys it now and if there is a possibility of it going up to 710, then we will book our profit at 708.
Okay, till here it is fine.
The real game starts after buying.
As soon as the price increases from 700 to 703, retail traders exit thinking that they may not even get the profit of Rs. 3.
You will not believe that 70% of retail traders exit by this price. The remaining traders book as soon as the price goes 1-2 rupees above this.
It is worth noting that when the market is moving in our favor, we are booking a maximum profit of 5 rupees.
On the other hand, if the movement goes in the opposite direction, 90% of retail traders do not exit the position thinking that maybe the price will come up now.
Now in the opposite direction move, most traders do the following things.
As soon as the price falls to 695, traders think that it has fallen by only 5 rupees. It will come back from here.
Then after a while the price fell from 695 to 690.
Even now, instead of selling, some will think that the price will rise. And those who are a little less confident buy more quantity. So that the average price will come down.
While doing this either he gets out in a loss of 10 rupees or he remains there.
Now let me tell you one thing that the person who takes a profit of 3-5 rupees and incurs a loss of 10 rupees, that too due to his personal feelings, will call it looting.
Hope the post will be useful for you
Thank you
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