You often hear Wall St. Jesus and traders in the Steamroom talk about the "Riff Raff" and "Sharpies". Here is a closer look at what type of traders that are hiding behind these two market participant descriptions.
Who are the Riff Raff?
Riff-Raff is in reference to “Retail Traders”: Retail traders are for the most part uninformed traders who get steered into traps and bubbles by smart, institutional market participants who know how to leverage news and retail traders' emotions to their advantage.
Generally, experienced traders try to position themselves on the opposite side of the trade as the "Riff-Raff". The "Riff Raff" has a tendency to be wrong and as an example, the chart below shows that they were net short for most of the COVID rally.
Who are the Sharpies?
Sharpies are Commercial Hedgers who's job is to hedge institutional portfolios through index futures. The commercial hedgers tend to stay fully hedged, so when they take their hedges off and go long, it is a highly bullish indicator.
Experienced traders tend to position themselves with the Sharpies, since they have a good track record for marking significant lows in the market. The chart below shows that Sharpies were max long off the COVID lows.
Questions or suggestions?
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