Exit liquidity in trading happens when you buy an asset at its peak, not to profit, but to unknowingly let earlier investors cash out with gains. Everyone’s hyped about catching the rally, but nobody warns you about becoming its exit liquidity.
You see green candles lighting up the chart, Telegram groups buzzing with excitement, and Square posts screaming about the next big move. It feels like a party you weren’t invited to, so you jump in, telling yourself the asset just broke resistance. But deep down, you know you’re not early. You’re visible. And that’s exactly what early buyers need: someone visible enough to sell to.
When an asset is up 40% and plastered across every platform, you’re not betting on the move anymore. You’re betting there’s one more fool after you to keep the price climbing.
Exit liquidity is what happens when the real trade has already played out. The smart money needs a way out, and you, chasing the hype, become their door. You’re not buying the dip. You’re buying someone else’s profit.
Why do people fall for this trap? Two main culprits: FOMO and recency bias. FOMO hits hard when you see prices soaring and worry you’re missing out on life-changing gains. Recency bias convinces you that the recent price surge will just keep going, as if markets only move in straight lines. That’s it. No strategy, just a rush of dopamine driving you to click “buy.”
The traders who come out ahead? They buy when nobody’s looking. When the chart is quiet, the posts are scarce, and the asset feels forgotten. That’s when you get in—not because it’s safe, but because it’s quiet. Because nobody’s trying to sell to you yet.
If the trade feels exciting, you’re probably late. If it feels obvious, you’re definitely late. When the trade is trending, it’s already someone else’s exit plan unfolding.
Don’t be the door.