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Understanding Weak Hands

[YassineNoBS]

The term "weak hands" typically refers to an investor or trader who is driven by fear to quickly exit positions on almost any news or event that they consider detrimental, resulting in realized losses and suboptimal returns on investment (ROI). They tend to adhere to a set of rules that makes their trading activities predictable and are easily "shaken out" by normal market price gyrations. The net result is that they end up buying at the highs and selling at the lows, a surefire way to lose money.

Weak hands can also describe a trader who approaches the market from the viewpoint of a speculator, and more likely a small speculator, rather than an investor. They will normally enter and exit positions with the intention of reversing those positions based on small price movements. Typically, this is a trader without the necessary conviction or financial resources to hold on to their positions.

In all markets, weak hands exhibit predictable behavior. Dealers and institutional traders will exploit this behavior by buying when weak hands sell and selling when weak hands buy. This forces the weak hands out before the market starts to move in the originally desired direction.