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Traders who enter near peaks face a cascade of forced liquidations that pull prices sharply lower. Adding capital or selling near liquidation levels can worsen the collapse instead of stopping it.
Traders who enter near peaks face a cascade of forced liquidations that pull prices sharply lower. Adding capital or selling near liquidation levels can worsen the collapse instead of stopping it.
When you just look at this chart, you're like, well, why don't these people get out of the way? Or why are they just sitting there letting this stuff come out? What I understand is these guys that are getting liquidated here got in here, you know, they got in up here and they immediately, when the prices went down 5%, they were already in significant drawdown. That's why we call it the tractor beam. Like Space Odyssey movies where you get in that magnetic beam and it just pulls you. You can't do anything but watch this thing come get you. You can't get out of the way. What people do when it gets close to their liquidation levels, they can start selling off some of their account. They can add more capital, but that's not really saving you. You're just giving feeding the beast. Yeah. And that creates those big dumps towards the end of those huge dumps, and these people get stuck, so you're not able to get out.
