A prominent hedge fund announces it has taken a substantial short position on BTC. This news triggers immediate buying pressure as traders seek to cover their positions. Within minutes, exchanges report a 10% increase in BTC price due to high demand.
Example 2:
A retail trader with a large account initiates a short sell order. As word spreads, other small traders join in, driving the price up sharply. The exchange temporarily halts trading due to heavy volume and poor liquidity.
Example 3:
A group of institutional investors collaborates to take a coordinated short position. This strategy results in sustained buying pressure that lasts for several days. Regulators step in, conducting an investigation into potential market manipulation.
Q: How does this affect smaller traders?
A: Smaller traders often find it challenging to navigate these situations. They may face difficulties in executing trades due to high volatility and limited liquidity. Additionally, they might miss out on potential gains if they try to cover their positions too quickly during price surges.
Account $10,000, risk 1% → $100 risk per trade. Entry $50, stop $48 → $2 risk/share → 50 shares. Target $54 (2R). If stopped, −$100; if target hits, +$200 (before costs).
Use an amount you can afford to lose while learning a repeatable process.
Decide a fixed risk % per trade, then divide by the price distance to your stop.
Match your timeframe: DAIly/weekly for swing; weekly/monthly for long-term.
Thesis, entry/exit, risk (R), emotions, result, next improvement.