- How the big players operate: Their psychology, motivation and objectives.

For many traders the psychology of the big players is a mystery.

The big players don't care about your stops

The truth of the matter is that retail trader's stops don't factor on the radar of bank traders at all. In-fact professionals don't even see retail stops on an individual level, nor could they care less because the sizes are too small.

Big players care about groups of stops

That is not to say, professionals don't care about stops. Stop orders are very important to the institutional traders on an aggregate level - that is, they care about where large groups of stops are sitting.

This could happen when, for example, a large number of retail trader's stops are sitting at the same level, or it could be where a corporate or fund has orders placed. Even though a bank trader only has knowledge of their own book, this grouping of stops is generally happening across a number of banks at the same time, so they will make assumptions about the positioning of the market.

The price is attracted to the supply at key levels

Once the trader is aware of the supply of liquidity at a certain level the market will often trade towards it.

Why? Two reasons:

• The motivations of the trader
• Liquidity

For bank traders, their first motivation is safety - they don't want to lose money.

The key levels are where there the liquidity is the deepest, where it is safest. If a bank trader needs to execute a trade they need a supply of orders to execute it against.

If there is no liquidity at a certain price then they will have to rapidly re-adjust both their thinking and their positioning because they are at risk. Conversely if there is plenty of liquidity at a certain price, then the bank trader can go about their business without fear of the market getting away on them while they are holding a large position they are obligated to execute.

This way they can minimise and chance of losses and make money from the order execution.

The big players are not so different from you

It's interesting to note that while understanding the flow can be helpful, the bank trader still uses:

• 1. Pattern recognition
• 2. Support and resistance
• 3. Fibonacci levels

The professional's main asset is experience in interpreting the markets, funds and time not any special information.

Knowing these behavioral habits they set baits and poor retail traders get trapped in them again and again.

1. They know how much is the risk appetite of small traders.
2. They know that 90% of small traders do not follow risk management.
3. They know where your SL (stop loss) probably is.
4. The illusion they create that market always moves in your direction after taking away SL.
5. The fact is small investors contribute hardly 5–10% of the daily volume but most of them lose because of the spordaic movements created before big rise or fall.
6. They know these new traders are following breakout strategies, MACD, RSI or buying based on news and silently distribute it at the top and then let the price fall till SL of small traders are triggered.
7. They also know that now small traders have started selling options which was their forte so now they are option buyers and volatility has increased so poor small traders aren’t able to make money selling options as well.
8. If you know how to track FII data you will see 95% of the time the positions of Retail traders is opposite of the positions held by FII (Foreign Institutional Investors) and Pro traders ( Prop Desk).

Bottom line - Monitor what the BIG investors are doing, not the small ones. Look for evidence that big players are getting positioned early in a move. Ride along. Profit.

I hope the above information is helpful.

Happy Trading :)