How do large funds play suckers in the crypto world? A complete breakdown of Smart Money trading logic.

Have you ever wondered why your textbook-style charts for Technical Analysis always get ruthlessly slapped in the face? The support level should have rebounded but was directly smashed through, the seemingly perfect trend line suddenly reversed, and after the stop loss was swept out, the price turned around and pumped up…

This is not a coincidence, this is institutional funds hunting.

Why do 95% of retail investors get liquidated?

The amount of capital controlled by major players in the crypto space (exchanges, hedge funds, large miners, etc.) is beyond your imagination. They are not influenced by the market, but rather actively shape the market.

The key here is: large funds need to fill their large orders, which requires massive liquidity. Where does this liquidity come from? It comes from retail investors' stop loss orders.

The institutions' tactics are very simple —

• See where retail investors place their stop loss
• A fierce sell-off/pump wiped out the stop loss.
• Harvesting liquidity, reverse riot

Most retail investors hold onto candlestick pattern textbooks (double top, triangle, flag, etc.) and completely fail to understand the rules of this game.

Understanding the “Language” of Institutions: Key Concepts Overview

结构（Structure） The market has only three states: rising structure (higher highs, higher lows), falling structure (lower highs, lower lows), and sideways (back and forth). Identifying the current structure is the foundation of everything.

Liquidity Pools Retail investors like to place stop losses at obvious support/resistance levels, especially at previous highs and lows. Institutions lie in wait at these points, harvesting stop loss orders to fill their large orders.

Swing Failure Pattern (SFP) The price rushes towards a certain high/low point, touches it briefly, and then turns around. This usually indicates that institutions are “taking a shot in the dark” to sweep stop losses – the real main trend is still ahead.

Orderblock This is an area that institutions have traded heavily in the past. In the future, the price will return here as if attracted by a magnet.

Imbalance A large candlestick forcefully breaks through the surrounding smaller candlesticks. This creates a “vacuum,” and the price will eventually come back to fill this gap.

How to profit from it?

Step One: Look at the Big Cycle to Find Direction Identify the main structure from the daily and 4-hour charts. Institutions are positioning in the larger timeframes, while retail investors are chaotically trying to catch the bottom on the 1-minute chart—this is the dividing line between winning and losing.

Step 2: Find liquidity and reversal points After a significant rise, let's first see if this is a good position to sell for a stop loss during a pullback. Usually, institutions will create a false breakout there.

Step Three: Follow the Institutions to Enter the Market When the price moves in the reverse direction after a false breakout, this is your opportunity. Set the stop loss at the extreme of the false breakout, and the profit target points to the next important structural point or liquidity area.

Step 4: Confirm with Trading Volume Volume not keeping up with the price pump? This indicates that this rise lacks strength and may reverse. The opposite is also true.

Don't forget the macro background

The BTC trend is positively correlated with the US stock market (S&P 500) and negatively correlated with the US Dollar Index (DXY). A rise in the US stock market usually drives BTC up, while an appreciation of the dollar tends to lower coin prices. The CME futures leave a gap when the market is closed on weekends, which is likely to be filled.

Summary of Core Ideas

The essence of Smart Money trading is: identify where retail investors' stop losses are, use false directional breakouts to sweep them out, and then the real trend begins.

Once you learn to see this logic, you can transform from being the one getting fleeced to standing on the same boat as the institutions. This does not mean you will make a profit on every trade, but rather your win rate will shift from gambling to a probability game.

Simply reading the articles is not enough; you need to repeatedly verify these signals in real trading. Look for a few historical trends and backtest them dozens of times using this framework to get a feel for it.

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