Whales in the crypto market use various strategies to manipulate price movements, accumulate assets, and liquidate retail traders. Here are their 9 traps and how to avoid them❓
1. Stop Loss Hunting
Whales push prices below key support or above resistance to trigger stop losses of retail traders.
Once liquidations occur, they buy/sell at discounted or premium prices.
2. Liquidity Grabbing
Whales need liquidity to enter and exit large positions without moving the market too much.
They create artificial price moves (fake breakouts/breakdowns) to attract retail traders into providing liquidity.
3. Pump & Dump (or Dump & Pump)
They accumulate an asset quietly, then create hype to pump prices and sell at the top.
Alternatively, they dump their holdings to create panic and buy back cheaper.
4. Fakeouts and Stop Hunting in Futures
Creating false breakouts to trap breakout traders.
For example, price breaks resistance but quickly reverses, liquidating long positions.
5. Order Book Manipulation
Placing large buy/sell walls to create a false sense of demand or supply.
Removing those orders before execution to trick retail traders.
6. Long/Short Squeeze
Whales open opposite positions before liquidating retail traders.
Example: If retail traders are overly bullish, they force a price drop to liquidate longs.
7. Accumulation and Distribution
Accumulation: Slowly buying without causing price spikes.
Distribution: Slowly selling without crashing the market.
8. Exploiting Leverage Traders
Whales target high leverage positions by moving prices slightly beyond liquidation levels.
9. FUD and FOMO Manipulation
Whales create fear (FUD) to buy cheaper.
They spread hype (FOMO) to sell at the top.
How to Avoid Whale Traps?
Use low leverage to avoid liquidation.
Set stop losses at strategic levels (not obvious support/resistance).
Follow volume and order flow to identify whale activity.
Avoid chasing pumps and falling for panic dumps.
Monitor liquidation heatmaps to predict potential whale moves.