The truth about stock retail investors: Why retail traders are always exploited and how to reverse the fate

From Plants to Investment Terminology Evolution

The term “cutting leeks” has been popular in the investment circle for many years, yet many novice investors still have only a partial understanding of its meaning. What is special about leeks as vegetables? Why is it used as a metaphor for retail investors’ losses in the stock market?

Leeks grow quickly and are highly resilient; after being cut, they can grow back again and again, endlessly repeating. This characteristic perfectly matches the phenomenon in financial markets: after retail investors lose money and are “cut,” new retail investors continuously flood into the market, cycle after cycle. This is also why the leek phenomenon in stocks always exists in the market—because the market is never short of participants.

Who Plays the Role of the Stock Market Leek

Becoming a “leek” is not accidental but the result of multiple factors stacking up.

Retail investors’ disadvantages are systemic. Compared to large investors and institutions, retail investors are at an absolute disadvantage in information resources, capital scale, and professional experience. The investment mentality of retail investors often involves short-term profit chasing, blindly following trends, with the curse of buying when prices fall and selling when prices rise seemingly always playing out. Conversely, institutions and market makers leverage their information advantage to lay out plans in advance, harvesting profits when retail investors’ emotions are most volatile.

Investors who become stock market leeks usually share these traits: lack of independent judgment, blindly following trends, not understanding profit-taking and stop-loss, being driven by emotions, and insufficient knowledge reserves. These may seem like personal habits, but they actually reflect a structural imbalance among market participants.

Four Major Traps in Retail Investors’ Losses

The deadly misjudgment caused by herd mentality

Seeing what others buy and following suit is the most common mistake. Retail investors lack the ability to independently research the target; where the market hotspots are, capital flows there. But by the time retail investors react, they often have already entered at the peak, becoming bagholders.

Knowledge gaps leading to decision errors

Many stock market leeks simply do not understand the logic of market operation, nor can they interpret fundamental and technical analysis. In this state of cognitive deficiency, investment decisions are naturally prone to errors. Even more frightening, these investors are easily misled by so-called “expert analysis,” following the crowd and ultimately suffering losses.

Greed and fear psychological traps

When making money, they want more; they miss the selling point. When losing money, they are reluctant to cut losses, holding onto the hope of “breaking even,” and end up with larger losses. This emotional fluctuation leads to the classic “buy high, sell low” phenomenon, which is opposite to the logic of winners.

The invisible hand of market sentiment manipulation

The market creates various illusions. The brief rebound at the end of a bull market, the technical rebound at the beginning of a bear market—these attract retail investors to enter. Large capital, by controlling the rhythm of emotions, induces retail investors to make wrong choices at the wrong times.

Full Analysis of the Market Maker’s Harvest Process

Market makers’ behavior of “cutting leeks” usually occurs during the transition between bull and bear markets.

In the late stage of a bull market, large funds have already made substantial profits through early layout, and at this point, they quietly start to offload. But new retail investors keep flooding in, confidently believing they’ve caught the opportunity, unaware that they are already near the top.

In the early stage of a bear market, the brief rebounds during the decline are packaged as “market bottoming,” deceiving retail investors again. Meanwhile, retail investors who bought at high points are still hoping for a rebound, but the market keeps falling, forcing them to cut losses. Meanwhile, market makers continue to sell into this wave of opportunity.

During this process, retail investors’ psychological cycle generally is: optimism → expectation → panic → despair → regret. Each emotional shift can be precisely exploited by large funds, becoming a harvesting moment.

Six Key Actions to Reverse Your Fate

1. Understand the risk characteristics of different investment methods

Not all investment tools are suitable for everyone. Stock trading offers high returns but also high risks, volatility, and strong operability, suitable for experienced investors; funds are relatively moderate in risk and suitable for long-term holding; forex and CFDs provide 24-hour trading and two-way profit mechanisms, but leverage risks are also higher.

Choosing an investment method that matches your risk tolerance is the first step to avoiding the fate of a stock market leek.

2. Choose a regulated trading platform

The legality, regulatory qualification, and trading costs of the platform directly affect your investment experience. Compliant platforms offer protection mechanisms (such as negative balance protection, stop-loss functions) that can help you cover losses at critical moments. Don’t choose black platforms just to save on fees; such decisions often lead to big losses.

3. Build your own investment methodology

Smart investors are not trend followers but learners and thinkers. Spend time learning market analysis, industry knowledge, trading skills, and gradually build your own judgment system. The key is to “listen to the majority, consider the minority opinions, and make your own decisions.”

No one can predict the market accurately, but through listening more, thinking more, and observing more, you can establish a relatively stable decision-making logic, which is the fundamental difference between leeks and winners.

4. Master the discipline of profit-taking and stop-loss

Setting clear profit-taking and stop-loss levels is the foundation of disciplined investing. For example, set a 30% profit target; once reached, exit decisively—don’t be greedy. When losses reach a set proportion, admit defeat immediately—this is called “preserving capital is the greatest gain.”

Many trading platforms have built-in stop-loss functions; learn to use them. They can automatically protect your funds when you cannot monitor the market constantly.

5. Diversify investments to reduce concentration risk

“Don’t put all your eggs in one basket” is basic financial wisdom, but many stock market leeks still make the mistake of concentrated bets. By investing in different targets and asset classes, you can effectively reduce the impact of a single target’s loss on your overall capital.

At the same time, learn to do both long and short trades, so you can seize opportunities during market declines instead of passively waiting.

6. Develop the habit of obtaining market information in real-time

Markets change rapidly; missing a major news event can turn profits into losses. Pay attention to major fundamental events and observe market performance through technical analysis.

Use tools provided by trading platforms, such as economic calendars, real-time news, and sentiment indices, which are much more efficient than scrambling in the information explosion. Adjust your positions timely to stay ahead in market changes.

Final Advice

Becoming a stock market leek is a gradual and unconscious process, but breaking free from the leek identity requires active change. Not all losses are failures; reviewing your trades, admitting mistakes, and improving methods are all signs of progress.

Warren Buffett once said: “Be fearful when others are greedy, be greedy when others are fearful.” During bear markets, you can actively buy, but during bull markets, you must think twice before acting. Instead of envying stories of overnight riches, focus on steadily accumulating knowledge, honing your mindset, and building a system.

The market will always have new leeks, but it doesn’t have to be you.