The truth about 'early morning market crash': The game between trap and wash and real decline
In the stock and futures/cryptocurrency markets, there is a phenomenon that has drawn the attention of many investors — 'early morning market crash'. This phenomenon seems to catch investors off guard, especially after the end of the Asian trading session and before the active European and American markets. So, what logic is hidden behind this phenomenon?
1. Trap and wash: visible decline
In trading, there is a strategy known as 'trap and wash'. This is a method that creates panic emotions, forcing investors to sell off their holdings, thus achieving the goal of gathering shares. If the decline occurs during the day or before 10 PM, this decline is usually 'visible'. In other words, the market deliberately allows investors to see the severity of the decline, triggering their fear psychology and prompting them to cut their losses. For example, a decline during the day yesterday stopped at 2 AM. This type of decline is often not a real decline but a strategy by market makers, aiming to collect cheap shares after retail investors panic and sell.
