As i write this in April 2023 from my point of view this concept is the most important one to understand. The market takes care of old business first. Old business often consists of speculators that are driven by news or simply by higher prices and their emotions, especially their fear of missing out. As a result they are sitting in bad located longs (shortside vice versa).
You can argue if the market makers do maneuvers by purpose to get the people into these bad positions or if the people do it on their own. It does not matter. Fact is, they often are in these bad positions. Now imagine how easy it must be for a big market making firm to create an inflection point on the top when the crowd is long. It is only a matter of time when the first bad located buyer starts to liquidate his position. The next follow and we get a liquidation break.
The game is not driven by news or fundamentals. The game is controlled by the big boys. And you, as a small trader, have the possibility to align your trading with these big boys.
Who do you want to be?
