In the nature, there is always a food chain, only those fittest ones could survive in each position. Sharks could swallow small fishes which eat little shrimps.
Similarly, in the food chain of stock market, institutional investors (big sharks) could determine the mega direction of stock prices, while retail traders (small fishes) follow the trend of stock prices, left behind speculators (little shrimps) who react to the uncertain daily market. Size is power, usually little shrimps are sacrificed, lose out in speculative stock market, especially when a stock is being manipulated.
Blumont in the penny stock crisis a few years ago was a good example. The big sharks (big boys) started to pushed up the stock prices, then small fishes (retail traders) who follow the uptrend could buy high sell higher to make money. Eventually when the share prices were manipulated, pushed up 100 times, it attracted some little shrimps (speculators) who just want to get rich quick but ending up a great loss when the big sharks start to sell all the shares, following by clever small fishes (traders) who follow the trend to get out with some gains or little loss, while the ignorant speculators continue to hold as long term investor when making a loss, ending up losing 99% of stock value, holding until today without clear understanding what went wrong.
There are many other similar examples of food chain in stock market (dotcom bubble in year 2000), property market (subprime crisis in year 2008) or even Bitcoin (from rally in year 2017 to crisis in 2018). There are many valuable past lessons which could be learned from food chain of stock market:
1) Big funds with smart investors could take the lead in investment markets but could also suffer when there is a global financial crisis which is a disaster in the world of nature. However, smart investors are usually longer term in holding or having strong fundamental business with sufficient past profits to last through the cold winter. The chances of survival is high.
2) Retail traders are smaller in size but if one could learn to follow the direction of money flow, sensing the potential market risks, chances of survival is also high but one has to be very flexible, including cutting loss when market direction is reversed.
3) Speculators could make a lot of money sometimes but high risk high gain strategy could get burnt eventually. Even if one could make many small profits, one big risk could wipe out all the past earnings when falling into a crisis without proper diversification. The worst is the stock invested (speculated) may have weak fundamental, one could lose all the fortunes with speculative investment which is worst than gambling.
A small shrimp may not necessarily be the loser in food chain of stock market. An investor with small capital could outsmart big funds if one could buy much stronger fundamental stocks in a portfolio, able to wait patiently to buy low and sell high (for cyclic stocks) or hold long term (for growth stocks) with market optimism, following traders to ride the trends in stock prices.
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