Contrarian view on cryptocurrencies and Bitcoin market
When you know the majority of people are heavily short or heavily bearish on the market, why is it that that's a contrarian signal? Because I don't think. I think these questions were asking mostly about newer, newer traders, maybe by maybe newbies who don't understand the country or in outlook. Can you explain quickly if you can, why it is that when for especially for folks either have or don't understand as contrarian outlook report, the last commitment traders report when the majority of non-commercials were heavily short net short on bitcoin.
Okay. There's two things to, uh, to, uh, to take care of. One is if everybody's short or it's the majority of people are short on a market who's left to carry on shorting it, a carry on, pushing the price lower, exact. So if everyone's already sure or a large majority are already short, then it doesn't take much buying or short covering. So to start to turn the scales, tip the scales back in the favour of, of whatever market is going back up again. So that's the first point there. So if you've got a large majority are either short or long, then it means that they're already on board on, on that particular move. So if there's an everyone is already short, then we need new money to come in and sell it again to keep pushing whatever that market is, lower this case, bitcoin. So if there's no new money or no new short positions coming in to carry on, pushing price down, um, then it doesn't take very much buying or it could be that some people who are short, they start to cover their short positions.
And when you cover your short positions that is buying because you trust and you play it back.
So what happens is that then means that you've got, there's a lot of pent up potential demand to turn the market the other way. The other thing is that when the majority are in a, in a long or short position, why is it that we shouldn't just be doing what they're doing? Well, one is we have to bear in mind is most traders around the world and not educated a trading very well. Most people who are trading the markets trade on emotions, they watched the financial TV programs, Oh, somehow analysis told me to go and buy gold or sell gold or whatever. So most of them are uneducated and so they trade based on emotions and humans are based out our, the big two emotions that we all feel in the market. So greed and fear and greed. So people get fearful when a market goes down and get greedy when it goes up and all that sort of stuff. So of course it's not cold traders.
Yeah. Sorry, go on. Sorry. I called Fomo, fear of missing out as well, which, which drove a lot of people to buy these highs.
Oh yeah, yeah, yeah. You were saying? Yeah. So, um, so, so that's why we don't listen what in many regards we don't want to do the same thing as what the majority of doing because usually they're basing their decisions on emotions rather than on, you know, calm, collected, technical analysis and thorough, thorough analysis. So those are the main reasons why we don't follow what the crowd are doing because the crowd are usually on the wrong for those reasons. Yeah, I mean basically, um, just to just let everyone know when I, when, when bitcoin was down here at these low levels of, near to six thousands, I just was thinking, hang on a second here. Not everybody can be correct. It just about everybody on social media, on the news everywhere were saying extremely bears calling for three thousand five thousand dollars on bitcoin. And I said, this doesn't make sense because the crowd are usually on the wrong side as you were saying. And when I looked at this, when I looked at the non-commercial and this has, this has got to be wrong, these guys are going to get these, these guys are going to get. Hosts are going to get slaughtered. And as you were saying, when bitcoin started to go back up, these short sellers, the only way the biscuit, what happened is as, as bitcoin was going up, their short positions went into loss.
The smart way you should try to start Bitcoin trading with small amount of money
They're going into a losing position because they're betting on games. So when bitcoin was going above these levels, it was taking out their stops, it was taking out there stop losses, and for folks who may not be aware of this, the only way a short seller can close this position is by doing the opposite of a sale, in other words, to do a by order taking profits off of their short positions. So they're therefore they're buying those short positions in banking, their profits or. And then what tends to happen is even as the market starts to come up, as you've just said, you'll get the other people who then quickly going underwater and the short squeeze you're seeing there, that big up move we've had in bitcoin will be a lot of people panicking out of their short positions. There'll be people panicking out their shorts that we'd be looking into getting along as well.
But, but most certainly yes, that will be happening. And as they come out shorts, then you are effectively buying when you're, when you're closing the sell trade. So that's adding fuel to rallies. And I will just say this, guys, this explains why we human beings are biologically programmed to be the world's worst investors and traders. That's biologically we're terrible investors and traders because what we do is we follow the herd when Bitcoin is going massively higher, when it's becoming like a bubble, when it's extremely high, these 20,000 levels, instead of doing the opposite, people are going, hey, with the herd, we're going to buy these highs and these levels, they're doing the exact opposite. Instead of looking for buying opportunities, they're looking for shorting opportunities, which explains why human beings biologically are incapable of buying low and selling high. And instead we most people do the opposite.
Most people do the exact opposite of that, and they buy high and they sell low.