Your Opponent

If you ever see a reporter printing fund manager perspectives on oil, commods, be weary. I’ve watched it happen. you can hear Jim Cramer talk about calling a “bozo reporter” up and feeding him bad info to improve a position. he admits to illegal manipulation of the markets and encourages hedge fund managers to do it, especially around the holidays when the markets are thin.

You can’t trust anything in the media about the future of markets.

Know thy opponent. Hft, institutions, market makers that hedge to Delta neutrality. Prop desks. we’re all competing for the same inefficiencies.

it’s a lot easier to trade when you know how these guys operate. hft kills momentum. breakout traders get decimated by hft. stop run inefficiencies are also targeted by hft and this little runt will push the market against you.

institutions will push the price to get a run, and then take the position on the other side. they have enough money to do so, even if it’s illegal they can and do. “just sell it to those breakout idiots” – actual quote from hedgefund manager.

market makers and brokers are a different beast all together, they hedge to make guaranteed money for eg writing options contracts, or giving you a position any time of the day. they’re often trading against the market moves. a broker that enters a cfd contract long will short the primary market to collect the spread as profit. a market maker writing calls will short the primary market for every $1 move to stay delta neutral (eg have no change in the value of their positions as the market moves) and they’ll do the opposite if gamma exposure is negative.

institutions will run buy/sell programs over days potentially where they will try to find fair value as the market trends on their massive moves. they break orders up to be undetectable – like hiding their hand in poker. these are “iceberg orders” and intend to hide a very large position from their competitors as you would never buy if you knew they had 100M in stock they’re trying to unload. Programs you’ll see as trends with vwap or avwap showing clear pressure in the trending market.

all this stuff drives the markets. you can look and say “that’s hft” and you know who your competitor is.
or you can look and say – “that’s an institution running a program.”
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