The truth about being "cut" in investments: How to identify traps and protect yourself

In the fields of stock, crypto, forex, and other investment areas, “cutting leeks” is the most common warning term investors hear. Whether in forum discussions or self-deprecating after investment losses, this term has long become a popular phrase in the investment community. But what exactly is “cutting leeks”? Who becomes the leek? What is the underlying mechanism? This article will start from retail investor psychology and market laws to help investors identify risks and avoid becoming the harvested target.

The Essence of “Cutting Leeks”: Information Gaps and Mindset Differences

The term “leek” originates from the plant’s characteristics—growing rapidly and able to regenerate after being cut. The investment community borrows this metaphor, referring to retail investors who frequently suffer losses as leeks. The core logic of “cutting leeks” is: large funds and institutions leverage information advantages and capital scale advantages to attract retail investors to buy at high prices, then escape at low prices, with the losses of retail investors flowing continuously to the main players like cut leeks.

This process is not accidental but an inevitable phenomenon in market development. As long as new retail investors enter, a new cycle of “cutting leeks” will occur, because the market never lacks inexperienced newcomers.

Common Characteristics of Retail Investors Who Are Easily Cut

Blindly follow the trend, lack independent judgment

Leek-cutting investors often rely excessively on others when making decisions. Seeing someone recommend a certain stock or crypto on social media, they follow blindly and buy in. These investors lack in-depth understanding of the market and have not conducted sufficient fundamental and technical analysis; they are simply “lucky.” Their investment logic is straightforward—buy what others buy, chase what is popular. The result is often buying at a high and getting trapped, then selling at a loss.

Insufficient knowledge reserves, unable to understand the market

The biggest gap between retail investors and institutional investors lies in knowledge accumulation and analysis ability. Many novice investors have only a superficial understanding of how the market works, lacking knowledge of fundamental analysis, technical indicators, capital flows, and other key concepts. This makes them prone to panic during market volatility. This cognitive defect prevents rational judgment, ultimately leading them to become passive recipients of market manipulation.

Lack of discipline in taking profits and cutting losses

Many losers have experienced this: wanting to make more when making profits, seeing gains increase but hesitating to exit, only to watch profits evaporate; unwilling to admit losses when losing money, holding on with the illusion “it will come back,” and ending up with larger losses. This lack of discipline in profit-taking and stop-loss is the biggest difference between leeks and mature investors.

Malicious cycle of chasing highs and killing dips

Influenced by market sentiment, retail investors often buy at high prices due to optimism and sell at lows due to panic. This contrarian operation not only misses real profit opportunities but also maximizes losses, creating a vicious cycle.

How Do Market Makers Systematically Cut Leeks?

The late stage of a bull market and the early stage of a bear market are the most active periods for “cutting leeks.” During mid-bull markets, market makers and retail investors enjoy the benefits of rising prices together, but as the bull market enters its late stage, those with information advantages begin to gradually offload. At this point, new retail investors, seeing continuous rises, become confident, thinking they have caught the last opportunity, unaware that they are already trapped.

When the market enters the early stage of a bear market, a brief rebound creates a false impression of “bottoming out,” attracting trapped retail investors to add positions and new investors to enter. Meanwhile, market makers take this opportunity to continue unloading and escape. The final result is retail investors holding ongoing losses, while market makers have already exited completely.

In this process, retail investors’ psychological journey is usually: optimistic → add positions → doubt → panic → cut losses. Meanwhile, the market makers’ operations are the opposite: bearish → gradually offload → successfully exit.

How to Avoid Becoming a Target for “Cutting Leeks”?

1. Choose investment products suitable for your risk tolerance

Different investment tools have different characteristics. Traditional stocks are more volatile, highly tradable but require sufficient time and effort; fund products have relatively lower risk and are suitable for long-term holding; forex and derivatives have high leverage, suitable for experienced traders. Investors should select appropriate tools based on their capital size, risk preferences, and knowledge level, rather than blindly entering unfamiliar fields.

2. Choose legitimate and regulated trading platforms

Platform security directly relates to fund safety. It is crucial to select platforms under authoritative regulation, with good reputation and sufficient liquidity. A professional trading platform should provide clear fee structures, effective risk management tools (such as stop-loss functions, negative balance protection), real-time market information, and reliable customer support.

3. Develop your own investment methodology

Investing cannot rely solely on intuition and others’ advice. Investors need to systematically learn market knowledge, study historical cases, summarize lessons learned, and gradually form their own trading strategies and decision frameworks. As Warren Buffett said, “Be fearful when others are greedy, be greedy when others are fearful,” which results from independent thinking rather than following crowd sentiment.

4. Strictly implement profit-taking and stop-loss plans

Before opening a position, clearly define your profit target and stop-loss point. For example, set a 30% profit goal and exit decisively when reached; also set the maximum acceptable loss ratio, and close the position promptly when reached. Many modern trading platforms offer automatic stop-loss functions; make full use of these tools to control your emotions.

5. Diversify investments to reduce concentration risk

Distribute funds across different investment products and markets to reduce the impact of failure in a single investment, and to seize opportunities at different market stages. Also, learn to use short-selling tools to seek profits during downturns instead of passively waiting for rises.

6. Build habits of information gathering and market judgment

Markets change rapidly, and timely information often determines success or failure. Investors should cultivate habits of regularly checking market news, economic calendars, and important data releases, combining technical analysis for more comprehensive judgment. Be cautious of so-called “experts” with one-sided advice; listen more, think more, observe more, and finally make your own decisions.

Summary: From Cognition to Action — An Advanced Approach

The key to avoiding “cutting leeks” lies in improving cognition and cultivating the right mindset. Many investors are cut not because of bad luck, but because of a lack of systematic thinking, disciplined execution, and respect for risk. Even after experiencing losses, true investors will review and identify the root causes, rather than simply blaming market unfairness.

The essence of investing is a probability game; no one can predict the market perfectly all the time. But through continuous learning, summarizing experience, and refining strategies, investors can increase their chances of success. Transitioning from being a leek to a professional investor requires time, knowledge, and practical testing, but every lesson learned is a valuable asset.