How do big players trade?

Hi guys. Do any of you know how large institutional traders(the ones with the big money) think and trade? Do they use technical analysis to speculate,such as spotting patterns as we do? Or do they just purely enter based on market fundamentals?

echo13 said:

Hi guys. Do any of you know how large institutional traders(the ones with the big money) think and trade? Do they use technical analysis to speculate,such as spotting patterns as we do? Or do they just purely enter based on market fundamentals?

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It maybe better to ask yourself the question first, and see what you come up with. For instance:

If you were a "big money player" what would your game plan be?

Also, what happens if the answer is neither of your options, ie. they dont use patterns or fundamentals?

I doubt if there is a single answer; check out those "market wizard" books.

Everyone does their own thing...

Most of them trade as bad as any trader out there. But they can fall back on their resources and client monies (commissions, rip-offs, assorted fees) to still earn good profits. A private trader of course cannot do this.

wallstreetwarrior87 said:

It maybe better to ask yourself the question first, and see what you come up with. For instance:

If you were a "big money player" what would your game plan be?

Also, what happens if the answer is neither of your options, ie. they dont use patterns or fundamentals?

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Good answer. Maybe a starting point would be

What are the limitations of being a "big player"?

and go from there.

From what i've read before,most, or at least many, big players use algorith trading,which is a totally different ball-game from normal retail trading. How true is this? Are there still institutional traders trading like us retail traders?

First you have to determine what trading actually means?

If it means pure trading, ie no suspect knowledge, no bid-offer spread playing, basically you come in everyday and see what everyone else sees, then the best traders use what's worked since time began, and will continue to work till time ends.

And what's that?

1) A deep and complete understanding of how markets work and operate (technical and fundamental)
2) A deep and thorough understanding of the psychology of the markets, and even more important
3) A deep and thorough understanding of how market psychology affects the majority of traders

That's what most use (if they're pure traders) to make the big money. So forget about super computers (if that was the key those with the biggest R&D budgets would own most of the planet), forget about tricks and inside info and any other complex strategies because etc.

Summary: It's basically all down to psychology and that can take years for most people to properly understand and implement. Which is why it's so hard to be a complete trader, relying on nothing else but your own skill.

But if you want to make money via arbitrage, option pricing, technical bond plays etc then that's a different matter.

echo13 said:

From what i've read before,most, or at least many, big players use algorith trading,which is a totally different ball-game from normal retail trading. How true is this? Are there still institutional traders trading like us retail traders?

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I'll dig out a pdf doc I've had on file (on other pcs) that breaks down the 6 key areas of hft-algo trading. If I think on I'll post it up on this thread over the next few days or start a thread with it. Technical trading was/is one of the 6 'disciplines' so you could in theory count that as "doing what we do"...

How do big players trade? With other peoples money. Which is also the difference between a mug and a pro, mugs will always use thier own money.

I always think of this post by Peter Crowns:

• The BIGGEST money is mostly interested in, and trades on what they KNOW. News, facts, inside information that they confidently can trade on. They enter today knowing what will be released in hours or days from now.
  
• The second biggest money trades primarily on price. They are the banks who offer a bid and ask to big and small traders. This is a huge business and is like a casino who has an edge on every transaction. They enter when others enter, they are only limited in profits by how many people they can get in their nets.
  
• The third biggest quantity of money is the funds who ride the bigger moves. They trade on price and time, breakouts of price/time periods or moving averages, which also are a

price/time function.

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Here's how it works...

Goldman Sachs is in the prison shower. They have large bulging muscles and are stronger than anyone else in the prison. They have a ferociously raging 'apetitie'. They are paying the prison guards to turn a blind eye. They have nothing to lose and can take unlimited risks.

The average retail trader is in the shower too. He is weak and will not put up any resistance if someone makes a move against him. He sees what he thinks is a golden opportunity - a brand new, still in it's wrapper, bar of soap, just sitting there on the floor, waiting to be picked up.

The rest, as they say, is history.

DionysusToast said:

Here's how it works...

Goldman Sachs is in the prison shower. They have large bulging muscles and are stronger than anyone else in the prison. They have a ferociously raging 'apetitie'. They are paying the prison guards to turn a blind eye. They have nothing to lose and can take unlimited risks.

The average retail trader is in the shower too. He is weak and will not put up any resistance if someone makes a move against him. He sees what he thinks is a golden opportunity - a brand new, still in it's wrapper, bar of soap, just sitting there on the floor, waiting to be picked up.

The rest, as they say, is history.

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Sounds like technical trading to me. When the retail trader breaks resistance they bend down (to pick up soap of course!) and this provides support for Goldman to go long.

Peter

Is it true that many of the big guys use a 10 period ema on the daily charts as an entry signal?

wackypete2 said:

Sounds like technical trading to me. When the retail trader breaks resistance they bend down (to pick up soap of course!) and this provides support for Goldman to go long.

Peter

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Straddle.

GS mission statement: every holes a goal!

DashRiprock said:

GS mission statement: every holes a goal!

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At the moment. They are just chasing your stops.

I thought this thread had the potential to be an interesting discussion, with some thoughtful responses. As a new member, I am unfamiliar with the community here, but from browsing around other threads it appears that the majority treat this business as a bit of a joke.

For those who approach trading in this way, it isn't difficult to predict their outcome. Are any of the membership interested in serious discussions, or just toilet humour?

hoodoo man said:

I thought this thread had the potential to be an interesting discussion, with some thoughtful responses.

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Often the way. The ones that seem like they should go well don’t. Or start off well and then get side-tracked. But you’re complaining over nothing. This thread so far has a better signal:noise than most.

hoodoo man said:

As a new member, I am unfamiliar with the community here, but from browsing around other threads it appears that the majority treat this business as a bit of a joke.

For those who approach trading in this way, it isn't difficult to predict their outcome. Are any of the membership interested in serious discussions, or just toilet humour?

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I doubt you’re in a position to predict anything and to answer your final question, most are here for a bit of both.