The "remoras" in the financial market: followers of the big whales

In the fascinating ecosystem of the financial market, there are various actors that play unique roles. Among them, we find the so-called "remoras," a term that refers to those investors or traders who closely follow the movements of the big players, known as whales or sharks.

This marine analogy is particularly apt, as just like the real remoras cling to large fish to benefit from their movement, small investors seek to take advantage of the strategies and actions of the most influential market players to achieve profits.

Operation of Financial Remoras

Remoras in the stock market use various tactics to take advantage of the movements of the whales:

Tracking large transactions: When a major player makes a significant move, such as a large buy or sell, the remora attempts to strategically position itself to benefit from the market impact.

Liquidity utilization: These investors use the liquidity generated by large volume orders to enter and exit positions more safely and efficiently.

Trace-based strategies: Without needing to fully understand the logic behind the whales' decisions, remoras simply follow the footprints left by these significant movements in the market.

Origin of the term "remora" in finance

The choice of this name is not coincidental and is inspired by the symbiotic relationship that exists in nature between remoras (small fish) and large marine creatures like sharks or whales.

In the ocean, remoras attach themselves to larger animals to move effortlessly and feed on the leftovers of their prey. Similarly, in the financial market, remoras avoid the hard work of developing complex strategies, choosing to imitate and benefit from the impact generated by the most influential players.

Advantages and Risks of Acting as a Remora in the Market

Adopting this strategy entails both benefits and potential drawbacks:

Advantages:

• Less effort in analysis and decision-making
• Ability to take advantage of trends marked by large movements
• Reduction of initial risk by following already initiated movements

Risks:

• Possibility of misinterpreting signals and following movements that quickly reverse
• Risk of entering a trade late, buying or selling at inopportune moments
• Excessive dependence on the behavior of major players, which can create vulnerability to sudden changes.

Practical Analogy

Imagine you are driving on a congested highway and see a large truck (the whale) making its way through the traffic. You, acting like a remora, decide to closely follow the truck to take advantage of the free space it creates. In the context of the market, this would be akin to following the movements of whales on the charts to benefit from their actions.

The success of remoras in the financial realm largely depends on their ability to correctly interpret the signals left by major players and act quickly and cautiously. While this strategy can be effective at times, it is crucial to remember that the movements of whales and sharks do not always generate predictable or sustainable trends.