Wholesale Vs Retail Prices

One of my sins is that I occasionally pop into 'free trials' of trading rooms. I do this perhaps once a month.

There is one I attended last week which was interesting. Basically, their teachings are as follows:

They heavily use the 'inventory' analogy - that you buy inventory of contracts and trading is just like being a retail shop. So - you buy your inventory at wholesale and sell your inventory at retail. Furthermore Pros buy at wholesale prices and non-Pros are buying at retail prices. Obviously, they are teaching you how to trade those wholesale prices.

They claim to be trading order flow but have a fairly simple indicator from which they make decisions about the flow. Not all is revealed in the room.

As the market moved up and down, it was people 'cycling inventory'...

They charge over $2,500 to teach you their methods

The reason I mention this is because a LOT of people in that room fell in love with all the terminology. I would like to discuss this 'wholesale' thing as it is quite common and I am not sure I agree with the implications. I want to know what other members think about it.

Now, I'm not going to name the room but the day in question was Thursday and we saw an overnight low of 1334.25 on the ES and the market went in one direction all day ended up at 1357.25 before giving 3 points back into the close.



Our room 'expert' spent the first 90 minutes looking for an opportunity to short at a wholeseale price.I asked what, if anything would make him consider a long. He said he would not consider going long because these prices were retail. I got disconnected after 90 minutes, some sort of tech issue I am sure...

Now - here's what I don't get. Let's say the concept is correct and that 1334.25 and thereabouts was the wholesale buying price. Who was it that did all the rest of the buying? Non-pros?

I asked the question. "If pros buy at wholesale - who does the rest of the buying" - his answer was that pros buy at the start of moves up and the rest of the buying is amateurs AND shorts exiting.

So let's change to a 5 min chart and add in some volume...



This is odd. It appears that the amount of trading at the lows was very small. If the pros got in here, and that very small amount of trading cause a 20 point short squeeze, then these are some very clever guys indeed.

I put this question to him - how could such a small amount of 'pro' activity cause such a big move up. Sadly, that was were my technical issues started.

Now, I can see the allure of this and I do understand buy low, sell high. Still, what bugs me is that I saw 1000 contract buy market orders firing off most of the morning on the ES. I would describe anyone that trades a 1000 lot order as a pro. There is no way in my opinion that "pros are only buying the lows and stops/amateurs cause the rest of a move".

One of the members here discussed a recent trade where he saw a $47 move up in Gold and nailed the reversal price almost to the tick. That would be a wholesale price. This is something I suffered from in trading for a long while. Watching a move up, waiting for the reversal point, knowing it was moving up, seeing it move up, seeing no signs of weakness yet, point after point after point upwards and NOT GETTING LONG!!!

Seriously - is getting on board an obvious move what amateurs do? Are 'pro's so precise they only buy 'wholesale' ? It must be a very exclusive club 'cause there ain't much volume there.

Here is my 'amateur' trade from... well.. about an hour ago.





This was definitely NOT a wholesale price but it did make money.

So what do you think - is this whole 'wholesale vs retail prices" just a bunch of terminology to wow newbies or is there something to it after all? Will you not blow lots of money trying to predict the 'wholesale price' where the pros enter aka catching a falling knife?

If you blow the terminology away, is there any merit in this market view?

DT

take a look at one of steve46 threads at traders laboratory for what I consider a good explanation of wholesale prices/behaviour.

steve46 linky linky

personally I buy the idea of heavy buying/selling activity at wholesale prices and to a large extent this shows up daily volume reports if you know what to look for. for swing trading I find it useful. for common or garden intrady though, it does not feature so I think the room you were in might just be another one of those high cost/low value places

The only terminology in your post I agree with is the "technical difficulties" - it has 1001 uses

ok, more to the point... If all the "pros" buy at wholesale and sell at retail then why do so many hedge funds fail.

The room moderator is making it sound easy (buy low/sell high) by putting it in terms most people can relate to. Your volume analysis probably had him cursing you. These rooms are geared to newbies who currently lack the industry knowledge or understanding to ask intelligent questions.

Peter

+1 pete.

incidentally, looking for days where SP volumes (not ES) from CME exceed 20k(ish) contracts and taking a look at a daily chart for S&P500 on those dates might give you an idea of what buying/selling at wholesale might possibly be.

incidentally DT, what other 'dirty little secrets' do you have? mine is that I keep about £1k in a spreadbet account which I just gamble with.

DionysusToast said:

One of my sins is that I occasionally pop into 'free trials' of trading rooms. I do this perhaps once a month.

There is one I attended last week which was interesting. Basically, their teachings are as follows:

They heavily use the 'inventory' analogy - that you buy inventory of contracts and trading is just like being a retail shop. So - you buy your inventory at wholesale and sell your inventory at retail. Furthermore Pros buy at wholesale prices and non-Pros are buying at retail prices. Obviously, they are teaching you how to trade those wholesale prices.

They claim to be trading order flow but have a fairly simple indicator from which they make decisions about the flow. Not all is revealed in the room.

As the market moved up and down, it was people 'cycling inventory'...

They charge over $2,500 to teach you their methods

The reason I mention this is because a LOT of people in that room fell in love with all the terminology. I would like to discuss this 'wholesale' thing as it is quite common and I am not sure I agree with the implications. I want to know what other members think about it.

Now, I'm not going to name the room but the day in question was Thursday and we saw an overnight low of 1334.25 on the ES and the market went in one direction all day ended up at 1357.25 before giving 3 points back into the close.

Our room 'expert' spent the first 90 minutes looking for an opportunity to short at a wholeseale price.I asked what, if anything would make him consider a long. He said he would not consider going long because these prices were retail. I got disconnected after 90 minutes, some sort of tech issue I am sure...

Now - here's what I don't get. Let's say the concept is correct and that 1334.25 and thereabouts was the wholesale buying price. Who was it that did all the rest of the buying? Non-pros?

I asked the question. "If pros buy at wholesale - who does the rest of the buying" - his answer was that pros buy at the start of moves up and the rest of the buying is amateurs AND shorts exiting.

So let's change to a 5 min chart and add in some volume...

This is odd. It appears that the amount of trading at the lows was very small. If the pros got in here, and that very small amount of trading cause a 20 point short squeeze, then these are some very clever guys indeed.

I put this question to him - how could such a small amount of 'pro' activity cause such a big move up. Sadly, that was were my technical issues started.

Now, I can see the allure of this and I do understand buy low, sell high. Still, what bugs me is that I saw 1000 contract buy market orders firing off most of the morning on the ES. I would describe anyone that trades a 1000 lot order as a pro. There is no way in my opinion that "pros are only buying the lows and stops/amateurs cause the rest of a move".

One of the members here discussed a recent trade where he saw a $47 move up in Gold and nailed the reversal price almost to the tick. That would be a wholesale price. This is something I suffered from in trading for a long while. Watching a move up, waiting for the reversal point, knowing it was moving up, seeing it move up, seeing no signs of weakness yet, point after point after point upwards and NOT GETTING LONG!!!

Seriously - is getting on board an obvious move what amateurs do? Are 'pro's so precise they only buy 'wholesale' ? It must be a very exclusive club 'cause there ain't much volume there.

Here is my 'amateur' trade from... well.. about an hour ago.

This was definitely NOT a wholesale price but it did make money.

So what do you think - is this whole 'wholesale vs retail prices" just a bunch of terminology to wow newbies or is there something to it after all? Will you not blow lots of money trying to predict the 'wholesale price' where the pros enter aka catching a falling knife?

If you blow the terminology away, is there any merit in this market view?

DT

Click to expand...

Toasty, I assume this is a rhetorical question as you know what they are saying is bo77ox

They must be making good money from that trading room. I see that deep pullback at around 10.00 on your chart that takes out a a load of stops then goes north. That was the market showing it's hand.

DionysusToast said:

So what do you think - is this whole 'wholesale vs retail prices" just a bunch of terminology to wow newbies or is there something to it after all?
DT

Click to expand...

nice idea, based on reading size and flow.....and (obviously) he's no good at doing so, otherwise, tech support would have been your bestest friend

What you were aware of toastie is that opening gaps are like magnets in the merketplace. You waited until there was a short term reversal , jumped on the train and jumped off at the gap fill point. Good game easy nice to see you to see you nice. If that is your gameplan and it works then do it. Alternatively you can spend all morning reading the FT, half the night recording bloomburg, study elliot wave theories in the shower, go out to city lunches and eavesdrop for stock tips, then when you have absorbed all this information you might be clever enough to make a trade but if you are like me then you will probably be a nervous wreck in need of a huge glass of whiskey. This situation cannot be resolved by thinking like a pro, or an amateur. It can only be resolved be being a boring mechanical trader.

Bint_Crusher said:

if you are like me then you will probably be a nervous wreck in need of a huge glass of whiskey

Click to expand...

DionysusToast said:

So what do you think - is this whole 'wholesale vs retail prices" just a bunch of terminology to wow newbies or is there something to it after all? Will you not blow lots of money trying to predict the 'wholesale price' where the pros enter aka catching a falling knife?

If you blow the terminology away, is there any merit in this market view?

DT

Click to expand...

Excellent post, very thought provoking.

So here is a question:

Are there only 2 parties?

Pros vs Amateurs/ wholesale vs retail.

Not all pros are wholesale, and not all amateurs are retail. Its only a label. But as you have pointed out, the terminology sounds good!

Terminology sells, but as you know because you have walked the walk, it usually has no value at all.

Your experience of "technical issues" when posing a question is not un-common I guess:cheesy:

DionysusToast said:

So what do you think - is this whole 'wholesale vs retail prices" just a bunch of terminology to wow newbies or is there something to it after all?
If you blow the terminology away, is there any merit in this market view?

Click to expand...

The world outside of trading generaly operates along these lines..
Manufacturer : Wholesaler : Retailer : Customer.
In trading who is the customer? The way I see it, is the retailer (because he is a fool) must sell back to the wholesaler mostly at a loss.
So that makes the wholesaler also the customer. None of this make sense to me.
Once upon a time, it was "smart" money until the financial meltdown, so "smart" money does lose after all.
Nobody wants to pay retail, everybody prefers wholesale and factory prices are even better if you can get it.
Wholesale trading prices and retail prices is PR BS.
All there is, is big money and little money. Which can both be smart money or dumb money.
Smart little money, pre-empts big money and takes a ride with it.
So we probably need a little more skill then average to make it work.
Only my opinion of course but I have to think like this in order to be successful.