The "Chopping Chives" Trap in Investment Markets: Recognize the Essence and Six Ways to Save Yourself

What is the “Chopping Chives” Phenomenon

There is a vivid metaphor circulating in the investment community—“Chopping Chives.” This term originates from the Chinese financial markets and is used to describe the ongoing losses retail investors face during trading.

Chives are used as a metaphor because of their unique biological characteristics: they are hardy, and after being cut, they can quickly sprout new shoots, cycle after cycle. The phenomenon in the investment market is similar—a group of retail investors lose all their funds, only for new retail investors to flood in, continuously being “harvested” like chives.

The core essence is: retail investors, due to a lack of systematic trading methodologies, are easily swayed by emotions, leading to poor entry and exit timing, ultimately causing their principal to flow into the hands of market elites.

Characteristics of the People Being Harvested and the Identity of the Harvesters

Who is prone to become “Chives”

Retail investors, especially beginners, are most susceptible to falling into this trap. Compared to institutional investors and large capital funds, retail investors are at a disadvantage in several aspects:

• Information Asymmetry: They possess less timely market information, often lagging behind major players
• Capital Scale: Individual retail funds are insignificant and cannot move the market
• Experience Deficit: Most novice investors lack the ability to judge market rhythm
• Psychological Fragility: They are easily triggered by short-term volatility, leading to irrational decisions

Who is doing the “Harvesting”

The counterpart to retail investors is the dominant market participants—usually institutions holding large sums of capital or main force funds acting in concert (commonly called “market makers” or “whales”). They leverage their informational and capital advantages to profit through:

• Quietly positioning before retail investors enter
• Using technical analysis to attract retail follow-on buying
• Quietly offloading when retail investors are concentrated in buying
• Building positions in the opposite direction during retail panic selling

Typical Behavioral Patterns of the Chived Retail Investors

1. Herd Mentality-Driven Follow-the-Leader Trading

Many investors lack independent judgment, buying whatever others buy, rushing into popular themes. They often do not conduct fundamental research nor technical analysis, simply following the crowd. As a result, they suffer the worst losses when buying at high points, only to regret after market reversals.

2. Knowledge Gaps Leading to Passive Situations

Market novices have no understanding of how investments work, cannot read candlestick charts, and are unaware of the difference between fundamentals and technicals, or even what they are buying. In this cognitive vacuum, any decision made is akin to gambling.

3. Greed and Hope for Luck

When making profits, they want more; when losing money, they cling to hope, expecting a reversal in the next moment. This mindset causes retail investors to miss optimal profit-taking points or stop-loss points, leading to increasing losses.

4. Emotion-Driven High Buy and Low Sell

During market enthusiasm, they are blindly optimistic, rushing to buy at the top, ending up holding the bag; during downturns, they panic and sell off, realizing losses at the bottom. The entire process is driven by market emotions, with rationality completely absent.

The Three Stages of the Market Maker’s Harvest Cycle

To understand the process of being “harvested,” one must grasp the logic of market maker actions within the market cycle:

Mid-Bull Market: Market makers and retail investors enjoy the rising dividends together, both making money.

End of Bull Market: Market makers, with sharper market intuition, begin quietly reducing positions or exiting. Meanwhile, new retail investors keep flooding in, dazzled by the bullish scene, confidently believing they have caught the last opportunity.

Early Bear Market: During the decline, a brief rebound creates a false impression of “bottom reached,” attracting retail investors to buy the dip; those who entered earlier continue to hold, doubting the trend reversal. Market makers use the rebound to exit the market. Retail investors suffer the most severe losses at this stage.

Six Practical Strategies to Avoid the “Chopping Chives” Fate

Step 1: Rationally Choose an Investment Method Suitable for You

Different investment tools have their characteristics; blindly choosing one can lead to pitfalls. Investors should select based on their risk tolerance:

• Traditional Stocks: T+1 trading, commission fees, more short-term opportunities but higher risks, suitable for those who can monitor the market regularly
• Fund Products: Diverse stock portfolios, relatively diversified risk, T+1 or T+2 trading rules, suitable for long-term conservative investors
• Forex Trading: 24-hour global market, highest liquidity, supports two-way trading, volatile and suitable for short-term but high risk
• Derivatives Trading: Low capital requirement with high leverage, can profit in both directions, suitable for knowledgeable advanced investors

Regardless of the choice, the key is to select a regulated, legitimate, well-supervised trading platform, which is the fundamental safeguard against being “harvested.”

Step 2: Develop Your Own Trading Methodology

The biggest secret to successful investing is having a set of rules to follow. Smart investors spend time learning, summarizing experience, and gradually forming their own trading logic:

• Learn the Market Mechanics: Understand different market trading mechanisms, risk characteristics, profit models
• Master Analytical Tools: Be able to read technical charts (candles, indicators, patterns) and understand fundamentals (financial reports, policies, industry trends)
• Establish Verification Mechanisms: Don’t blindly trust “experts”; think independently about all viewpoints

A practical principle is: “Listen to the majority, consider the minority, make your own decisions.” No one can predict the market precisely, but by listening more, thinking more, observing more, you can gradually develop your own judgment standards.

Step 3: Cultivate a Strong Mindset and Emotional Control

Technical skills can be learned, but mindset requires cultivation. The most common “devil’s law” in the market is: buy when it falls, sell when it rises. This is not coincidence but an inevitable result of market emotion-driven behavior.

Tips to avoid emotional hijacking:

• Be cautious in a Bull Market: When others are greedy and the market is hot, be extra careful
• Stay calm in a Bear Market: Panic often breeds the greatest opportunities, but patience is needed
• Be rational in both profits and losses: Act according to your plan, regardless of short-term fluctuations

Warren Buffett’s investment philosophy remains a golden rule: “Be fearful when others are greedy, be greedy when others are fearful.”

Step 4: Set Stop-Loss and Take-Profit Levels to Protect Your Principal

Many retail investors lose because they lack a “clear exit plan.” Setting stop-loss and take-profit points is the most basic protection for your capital:

Profit-taking Strategy: Exit decisively once your target profit is reached. For example, set a 30% profit target; once achieved, take profits and avoid expecting 100% gains. Preserving existing profits is more important than chasing larger gains.

Stop-loss Strategy: Cut losses at a predetermined percentage. For example, set a 10% loss limit; know when to sell to prevent small losses from turning into big ones. Many modern trading platforms offer automatic stop-loss features—using these tools can significantly reduce irrational decision risks.

Step 5: Diversify Investments and Don’t Put All Eggs in One Basket

Concentrated investments in a single asset are most likely to wipe out your principal. The core of risk diversification is portfolio allocation:

• Don’t allocate all funds into one market or product
• Invest in different risk levels simultaneously
• Use long and short strategies to find opportunities even in declining markets
• Adjust your portfolio according to different market cycles

Diversification is not about earning more but about surviving longer.

Step 6: Continuously Gather Market Information and Adjust Strategies Dynamically

Markets change rapidly, and opportunities can vanish in an instant. A common mistake among retail investors is focusing only on technical analysis while ignoring fundamentals. In reality, a major news event can change the entire market trend.

Proper ways to gather information:

• Follow policy trends and major events
• Track mainstream financial news platforms
• Use built-in tools of trading platforms (financial calendars, real-time news, sentiment indices)
• Combine technical performance with fundamental insights for comprehensive judgment

Practice with these tools before actual trading to learn how to extract useful information, helping you react faster than blind retail investors.

Summary

The cruelty of the investment market lies in the fact that being “harvested” is not a matter of “if” but “when.” If you cannot follow the above six points, you will eventually taste losses. But the good news is: none of these are innate talents—they are skills that can be learned and practiced gradually.

Investors who have already been “harvested” need to reflect: Is there a problem with their methodology, or did they deviate from their plan during execution? Reviewing past trades to identify weaknesses helps prevent repeating the same mistakes next time.

Investment is a marathon; winners are often not the smartest but those who master risk management, emotional control, and information management. Avoid the fate of “Chopping Chives”—start building your own investment system today.