T2W Trading Community

Taking out stops:

This is classic misrepresentation. First of all, as stated above, price movement is controlled. Secondly, they are invisible especially if you use contingent stops which technically don’t even exist. Thirdly if you are doing card tricks with three year olds, you don’t have to hide the cards really well. Look, market makers learn from experience that people are basically lazy and creatures of habit. If a stock dips to seventy dollars and rises a bit, it may indicate that buy stops kicked in. If volume increases it may indicate stops were present as stops do tend to be set at whole numbers. Well that kind of sets a precedent for the next trip to support. If you set your stop at seventy and get hit only to see it bounce you may feel violated and cheated, but remember three year olds are easily impressed and offended. When a pheasant hunter goes into a field they look for stands of tall grass. They send the hunting dog over to rustle the grass and if birds fly up, were the hunters cheating? No, they are just good hunters. Folks, this is their business and it is a competition but not a war. Businesses may fight each other but not their customers. Now salesmanship will dictate that they try to get the customer to pay the best price but they are not out to get you! If you make it easy for them by your lack of skill it is not their fault and they are not the bad guys.

I train my students to use contingency stops so that they are completely invisible to the market but not because I am afraid of market makers. I want the student to set up If –Then scenarios that keep them neutral in their trading. I also show them where the traps and land mines may be and where stops make the most sense. It is simply learning to play the game and a big part of that is learning the competition. The retailer is not your enemy, they want your business and they do provide a service but you must learn to not overpay or fall for that flashy lure because the pros are not going to dumb down the game for you.

There are effectively floor cops for the exchanges and very strict rules. The Floor Governors committee has over 20 checks and balances to monitor and regulate ALL trades. No one can operate in a vacuum or under the wire. Time stamps record every action and if you suspect foul play you have the right to request a time stamp and proof that your order was handled to the letter of the law. If there is a mistake it is corrected in your favor. If foul play was uncovered it could cost the market maker their license. By the way in 1999 a seat on the NYSE sold for 2.6 million dollars. Currently a NYSE seat goes for 1.1 million dollars and the Chicago Board Options Exchange (CBOE) seats go for $590,000. Try to imagine a market maker risking that investment over a fifteen cent spread. FOLKS, listen to me… it does not happen. Manipulation happens and games are played but not like the myths and stories suggest.

So… please let go of the blame, the rhetoric and epitaphs that so conveniently hide our own deficiencies as traders. Step up and own your skill level and do something about it.