Psychological Traps Set by Market Makers to Ensnare Investors
Market Makers create a matrix of psychological traps designed to welcome “investors” when they enter the market. Every case is similar, built on a deep understanding of the behavioral psychology of the majority when participating in the market. Let’s take a case study with COWUSDT.
As you can see, on the D1 (daily) cycle, COW has dropped by approximately 77% from its peak to the current bottom. But overall, do you think the market just plummeted straight to the bottom in one go, with the amplitude measured at 77%? The answer is no. As you observe, the chart shows numerous downward waves and plenty of upward waves. The total energy of the declines must outweigh the energy of the increases because COW is in a downtrend. The net result of this relationship is -77%, meaning the COW asset has lost 77% of its value from its peak.
The upward movements subtly influence your behavioral psychology. In the first wave, the market only dropped by -34%, but shortly after, it rebounded by 24%, meaning your asset balance only took a 10% hit in terms of capital. If you bought $1,000 worth of COW, this drop would nominally feel like you only lost $100. Then, the journey of ups and downs continues—declines followed by rises. These rises are merely temporary corrective waves within the broader downtrend. For individual investors, they might still feel happy because, at times, even when their assets suffer significant losses, the market adjusts the next day, reducing the magnitude of the decline. You feel happy about that. Then your mind tells you, “Don’t overreact, folks—look, the market’s bouncing back already. See? We’re holders; this nominal loss doesn’t mean anything. We haven’t sold yet, so it’s not a real loss, just on paper.”
But the market delivers multiple blows, causing your asset to lose nearly all its value and sit there for a long enough time that your investment becomes inefficient in terms of both time and value.
This COW case is based on the D1 chart—it’s short-term. But if it were a different asset on a different cycle, like the monthly (M) chart, you might not even realize which side of the slope it’s on. If you keep buying or holding based on psychology, you’ll end up paying a price.
Wishing you successful investing!