The most frequently asked question in the market recently: What exactly is a shakeout? Why does the main force insist on doing a shakeout?

Honestly, if you can't understand this question thoroughly, then repeatedly paying tuition in trading is more a matter of inevitability than bad luck.

Let's reveal the truth: a shakeout is never about accumulating chips.

Truly capable main forces usually complete most of their position building in secret before the shakeout. The sole purpose of a shakeout is purely— to clear out those who can't hold their positions, paving the way for subsequent upward movement.

What are those chips that can't be held? Simply put, floating chips—those that could be sold at any moment. These chips mainly come from three types of traders.

The first type is short-term traders, who are eager to exit after earning 5% to 10%, and can't wait for the real main rally to arrive. The second type is retail investors who have been trapped before; once they are untrapped, they want to escape immediately, preferring to earn less rather than experience being trapped again. The third type is trend-following traders, who have a half-understanding of technicals; as soon as they sense any movement, they set stop-loss orders and exit at will.

These three types share a common point: their rhythm is completely out of sync with the main force.

Once the true upward phase begins, these floating chips are often ruthlessly knocked out at critical points—either dragging down the entire market rhythm or triggering panic selling. Therefore, the main force must deal with these unstable chips in advance.

Common shakeout methods roughly fall into three categories.

The first is box-range manipulation, where the price oscillates repeatedly within a certain range, grinding short-term traders until they lose patience. The second is breaking support to shake out, where a large bearish candle directly breaks through support levels, triggering collective stop-loss orders from technical traders, but then the price quickly recovers, leaving behind retail investors who were shaken out. The third is false breakout tactics, where the price is pushed higher to lure in traders, then suddenly reverses to smash the market, thoroughly shaking out those who are not firm enough.

After the shakeout, those chips do not disappear into thin air; they change hands. Panicked traders exit, bold traders enter, and the overall cost basis of holdings is pushed higher. When the market rises again, the selling pressure is naturally lighter.

Many traders actually misunderstand: your opponent is not the main force, but other retail investors. The main force simply exploits human nature's weaknesses, using price fluctuations to exhaust retail traders against each other. Once you truly understand the essence of a shakeout, you'll realize—many of the positions you once thought were "being tricked" into are actually opportunities to get out early.