Hi everyone, I'm looking to get your guidance so that I can learn from my last 2-3 weeks' of trading activity. I am trading what I consider decent size in a single product (half a percent of the daily volume). My trades are quiet and I tend to not wipe out the order book (term?) too badly when I move in and out. I am taking liquidity. However, there is someone (or a couple of people) trading 10 times my size. They are impacting the price using what I think are market orders. Do you guys have any advice on how I should act? Do I continue to do what I want to do and disregard this guy, or use their trades as some kind of anchor? I actually think he's screwing up my trades when I go in earlier than him... Looking to learn, any help very welcomed.
If he comes in with a giant order, the price seems to walk up very significantly tick by tick for a while after with almost no volume (I'm assuming it's the MMs' algorithms). Why does this happen - is there some mechanism I'm not understanding? Bots looking/sniffing for liquidity or small real purchases?
Algorithm could detect your a legitimate buy order at the limit and just keep walking up. You’ll see mm algos hit your bid for a share or some odd lot just to make sure your real. Detect your orders real, they have the beautiful access of darkpools and buying retail orders and just lean on your order if they need to offset their book. Your a human, theirs lots of market making algorithms out there. The days of human market making are long gone.
I don’t know that it’s so simple...at least it looks more nuanced from where I sit. I see this other trader sometimes creating having for the MM bots and they widen their spreads considerably. Not trying to imply the mm is a human btw, but I do think the large block orders are human.
This is what I think...the price will hang up in a higher zone and then just get smashed quickly back down when the volume comes back in. Would you want to be ahead of a very large order or do you prefer to enter after you see it? I can’t decide based on what I’m seeing...
If your trading large cap stocks than no doubt you are a small fish in an ocean with whales, unless you trade with billions. My general theme is to aim to enter as close as possible to were whales left footprints. Last Fri I got an alert & got positioned as close to where the whales are accumulating as possible since they will protect this level. These whales use aggressive buy-side orders once they have accumulated to move the price enough to get a reaction from HFTs & momentum traders. I never want to bet against these whales - they can run you right over.