Commercials vs Speculative traders

Commercials are negative-feedback traders; they typically buy on a scale down, and sell on a scale up. But they have double protection from the losses that can mount from holding a position through an adverse move. With the belt and suspender security of deep pockets and offsetting cash positions, commercials can add to a long position on a scale down (or a short position on a scale up) with near impunity, while margin calls are doing in lesser traders. Speculative traders enjoy other trading edges, but regardless of size, speculators face finite leverage
limits. (Think Long-Term Capital Management, Tiger Funds, Aman Capital, Marin Capital, Baily Coates Cromwell Fund, Amaranth Advisors, Archeus Capital Management, and dozens more.)


Note distribution in red on block chart



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