Zoomania in the Market or Be Whoever You Want!

The first animals I encountered in the market were bulls and bears. Bears press down with their paws, and when they prevail, the price of an asset falls, forming a “bearish trend.” Bulls lift with their horns, and when they succeed, they form a “bullish trend.” Thus, bulls and bears serve to figuratively describe the direction of market movements and, perhaps, do not provide any psychological characteristics of market participants.
About seven years ago, I discovered a new market term for myself — “hamster.” I sincerely do not understand why this fluffy creature is insulted. The etymology of this word begins with the Avestan (an ancient Iranian dialect) “hamaēstar,” meaning “enemy, one who brings down,” and ends with the German “hamstern,” meaning “to hoard.” Hamsters are known for being hoarders (having very large cheek pouches), highly prolific (they can become pregnant within 24 hours after giving birth), resilient, and possessing good memory. Which of these characteristics indicates thoughtless, impulsive market actions driven by a symbiosis of stupidity, greed, and despair, I do not know.
But let’s return to the classics. The next mammal in line is the whale. It denotes a major player in the market whose actions, due to significant volume, can influence the price of an asset. Many strategies offered for learning in the market are based on the ability to identify precisely the whale because a whale cannot be wrong, will not protect me, but is safe to follow. Technically, such strategies are built on the ability to read the order book or analyze trading volumes.
When discussing the feasibility of volume-based trading strategies, I note that in the last quarter of a century, electronic trading has revolutionized trading. The market has learned to protect volume information and continually evolves in this direction. Besides Iceberg Orders, Hidden Orders, Reserve Orders, or Dark Pool Orders, there are now orders such as Pegged Orders, Midpoint Orders, Discretionary Orders, and the list goes on: Stop-Limit Orders with Hidden Components, Hidden Peg Orders, Synthetic Hidden Orders.
If the first group of orders merely allows hiding the owner’s intentions and maximally altering the visible part of the intentions, then the further development of this topic led to the emergence of changing hidden intentions depending on the market situation. How can this be taken into account? For this, you must not only see the whale, but you must also know what the whale intends to do. Remember the phrase: “Nothing is as it seems.”
Stop fearing someone invisible and large who is hunting your stops. The platform I trade on sends me a report on trading volumes every month. In the picture, you can see this report for June in crypto. All participants are divided into four categories: HFTs (high-frequency traders), hedge funds, brokers, and others. The share of brokers and others is around 10 percent, with the “others” category being less than one percent. The share of hedge funds ranges from 50 to 70 percent, and the remaining 30% on average belongs to HFTs. This is in absolute volume terms. I have a hypothesis that everyone who believes in this animal kingdom falls either into the brokers’ category, with the broker acting on their behalf, or into the “others” category. Simple math shows that no one is hunting you.
The next category of market participants is sheep. Their characteristic is following other investors without having their own strategy. Usually, sheep follow the trend. Their success depends on which stage of the trend they joined.
Pigs. Their distinctive feature is the desire for quick and large profits. They often risk more than their means allow, for which they inevitably pay the price: “pigs go to the slaughter.”
Wolves. Aggressive and experienced investors. They exploit the vulnerability of other market participants. Actions on the edge of the law are their forte. Insider trading, takeovers, and the principle of “not caught, not a thief” can be attributed to their methods.
Foxes. No less experienced but creative investors, they try to find unconventional ways to profit. The emergence of new financial instruments is their merit.
Chickens. I think everything is okay. They avoid high risks and prefer to gather grain by grain. Their assets are either bonds or deposits. They are the founders of classical investment theory.
And finally, leopards. They appear unexpectedly and disappear without a trace. Their goal is a short-term deal and quick profit.
Leaving the world of zoology, market participants are divided into professional and non-professional. Criteria of professionalism: years in the market (from three), the amount under management, and trading turnover. The attrition statistics in the retail market are well-known. Since around 2016, licensed companies have been required to publish on their websites the percentage of clients losing money. Much depends on the trading conditions provided by your broker. Preferential terms should be provided for trading volume, not the deposit amount, as the broker lives off the commission from turnover.
And these turnovers start from tens of millions of dollars per month, regardless of whether with leverage or not.
To work successfully in the market, you need to be a Morphling, i.e., able to take on any guise. Trading is a different mindset, and whether to acquire it or remain who you are now is up to you.
Sincerely.