The Truth About Trading: How Institutions, Brokers & Prop Firms Profit Off Retail Traders
📍 Who’s Really Moving the Markets?
Retail traders (Dumb Money) – Small traders, mostly unprofitable, chasing setups that banks set up for them.
Institutions (Smart Money) – Banks, hedge funds, and market makers who move the price, manipulate liquidity, and use retail traders as exit liquidity.
Brokers (The Middlemen) – They profit whether you win or lose, but mostly when you lose.
📍 The Key Differences Between Retail & Institutional Traders
Retail Traders (Dumb Money) 🤡
Trade based on random indicators 📉
Over-leverage and gamble 🎲
Buy at tops and sell at bottoms 😭
Follow “gurus” and signal groups 📢
Blame the market when they lose 🤬
Institutional Traders (Smart Money) 🏦
Trade based on liquidity & order flow 📊
Control risk & use structured position sizing 📏
Trap retail traders & take their liquidity🏦
Use proprietary strategies based on data📡
Adapt & adjust to market conditions 🔄
📍 How Banks & Hedge Funds Profit From Retail Traders Losing
🔹 Stop Loss Hunting – They push price into areas where most retail traders put their stops to liquidate them.
🔹 Fake Breakouts – They make price look like it’s breaking out, trap traders, and then reverse it.
🔹 Liquidity Grabs – They use retail orders to fill their own big positions.
🔹 Spread & Commissions – Brokers encourage frequent trading because they get paid on every trade.
📍 The Harsh Truth
Retail traders are the product. The market is structured so most people lose money.
If you don’t change the way you trade, you will NEVER win long-term.
You MUST learn to trade like institutions or get played by them.
🔑 Key Takeaway:
Institutions need retail traders to lose so they can win. The sooner you realize this, the sooner you can stop trading like a loser and start thinking like the banks.