Dorian

An update on small cap market cycles: (long post) By my objective measures (gap/runners/liquidity/multiday stats), the market is actually on the hotter side compared to 22', 23', and early/mid 24'. However, the small cap market has become extremely competitive. Short sellers are experiencing repeated outlier (not so outlier anymore) moves that their back tests can not prepare them for, and long traders are either missing moves completely or fighting each other for the same exact fills all day long. If you have been a member of small cap markets for the last 3-5 years, my guess is you have felt this shift in price action in the last 6-12 months. It has become especially noticeable in the last 4-5 months. I do not believe this is just another cycle. I believe we are witnessing the beginnings of a permanent change to small cap markets that was simply not possible before 0 commission trading. (circa 2020) Let me explain: It has been 2-3 years since the emergence of the first public hyper scalpers (500-1000 trades/day). Since then, the hyper scalping niche has grown exponentially due to the amount of educational rooms and live streamers literally giving away the strategy completely free. Relentless, Warrior, Farmer, Moon. These are just a few of the educators with hundreds+ of people each chasing their trades in real time every minute of the day. You can find their videos all over YouTube, their meetups on TikTok, and their pnl posts are the perfect marketing tool for a young generation who has given up on the 9-5 and is hungry for internet wealth. Add in the low barrier to entry (0 commission brokers), stable equity curves, and lack of blowup potential has made hyper scalping the obvious choice of strategy for any new trader. As a result, there are now literally 1000's of traders tuning in to live streams and discord rooms trading the same handful of gappers every single day. I recently introduced a friend to trading who had absolutely 0 experience in the stock market. I gave him a technical analysis book to read and some general advice and left him on his own. 2 weeks later, he texts me that he has been watching "Ross Cameron Youtube videos", and he shows me that he is already placing trades in some of the exact spots that took me years of studying to find. It took him only 2 weeks with no direction to get funneled right into hyper scalping. Obviously he is very small size right now, but this is the exact process that has been occurring for 3 years now. And the other traders' 6-12+ months ahead of him are already influencing price action. Fact: When a few people all buy/sell the same exact spot, price is going to respond. When 100's or 1000's are doing it, you are changing markets in real time. Here is how it is changing price action... You can think of hyper scalpers like "exaggerators" of market movements. On the frontside, they are pushing these stocks higher and longer with less reasonable dips. On the backside, they are getting liquidated in rug candles and halt downs with less reasonable bounces. In the consolidations, they are constantly buying and selling on top of each other leading to some soaks and stuffs. Those crazy all day halt names you see. There are 100's of hyper scalpers buying those unhalt washes and selling the halt bands and rinse repeating the whole way up. Then on the way down, they are getting crushed buying dips. Big players still need to initiate moves, but hyper scalpers are like fuel to the fire, in both directions. And the amount of fuel entering small cap markets has been steadily growing for 2 years now. Small cap cycles used to operate on a couple month basis. Hot, neutral, cold, neutral, hot, and so on. But now a single day of activity can ignite a frenzy of fomo buying and a couple poorly timed offerings can kill the cycle overnight. The hyper scalpers are here to stay, and they are undeniably bringing MORE edge to the markets on both sides. A lot more edge. I personally believe hyper scalpers are a huge net POSITIVE to small cap markets. Change does not automatically equal bad. And that is a common flaw in human nature. We instinctively are anti-change. Meanwhile, the ones who accept change and adapt the fastest remain the most competitive. If you learn to adapt to wider ranges, quicker cycles, and more volatility, the opportunity for a small cap trader is now easily into the high 7 figure and low 8 figure range. The action will only continue to get more competitive as time passes, so the takeaway from this post is that you must always be observing and adapting your trading. How many top traders of 2020-2021 markets have we seen stagnate? The current change in small cap markets is on a lesser scale than covid markets and is far more gradual, but it is still extremely noticeable and requires adaptation. End. Thanks for reading please drop a comment if you wanted to agree/disagree with something or just add your point of view for discussion. Follow me on ig 'kycefn' for my personal life. Cheers.