Sardines represent small investors who, unlike whales (big players) and sharks (experienced investors), have little experience, knowledge and preparation. Just like in the ocean, sardines in the financial market are numerous, but they tend to be vulnerable and easily “captured” by more experienced investors.
Why do sardines often lose at the market?
1. Lack of information:
• Sardines do not understand what is happening behind the scenes in the market, such as large whale orders, price manipulation or news influence.
• They often act based on rumors or tips from third parties, without checking whether the information is reliable.
2. Lack of knowledge:
• They don't know basic concepts like support and resistance, reading charts, volume or technical indicators.
• They don’t know how to interpret market movements and make emotional decisions, without a clear strategy.
3. Inability to interpret news:
• Sardines overreact to headlines or rumors.
• Example: News about an interest rate increase can make sardines sell everything, while experienced investors analyze the real impact before acting.
• They often confuse irrelevant information with important data, making wrong decisions.
4. Follow the herd:
• Sardines tend to copy what the “masses” are doing, buying when the market is rising (when it is already late) or selling in panic during a decline.
• This results in buying high and selling low, which is exactly the opposite of what should be done.
5. Emotions in control:
• They act out of fear (selling low) or greed (buying high).
• They do not have the patience to wait for the right moment, often making losses before the market recovers.
Why are they called sardines?
The metaphor comes from the ocean:
1. There are many, but they are small: Sardines are the majority on the market, but they have little individual strength.
2. Easily preyed upon: In the sea, sardines are easy prey for sharks and whales. In the market, they are manipulated by big players.
3. They move in schools: Sardines follow each other, which in the market is equivalent to acting like a herd, without their own strategy.
Practical example: How do sardines lose weight?
Imagine that the price of a currency, like XRP, is rising rapidly.
1. Sardines see the price rise and, motivated by greed, buy at the high, believing that the price will continue to rise.
2. Whales, who have already bought before, start selling and taking profits, causing the price to fall.
3. The sardines, now dominated by fear, sell desperately to avoid greater losses, consolidating their losses.
This cycle of buying high and selling low is what keeps sardines in the position of chronic losers.
How can sardines avoid losses?
1. Study the market:
• Learn basic concepts such as reading charts, trends, support and resistance.
• Understand how news affects prices and do not react hastily.
2. Avoid following the herd.
• Make decisions based on your own analysis and not on what the majority is doing.
3. Control emotions:
• Have patience to wait for the right moment to enter or exit a trade.
• Don’t let fear and greed dominate your decisions.
4. Have a clear strategy:
• Know how much you are willing to lose (stop loss) and when to take profits.
Conclusion
Sardines lose in the market because they lack information, knowledge and discipline. They act emotionally, reactively and follow trends without understanding why. To stop being a sardine, it is essential to study, develop strategies and learn to interpret the market calmly and rationally. After all, in the financial market, knowledge is what separates predators from prey.
