How do you invest billions? How do you invest in US stocks when liquidity problems limit your size? Even more so when trading on other exchanges or on single funds like oil. How do you get a block trade done? How do you access dark pools? Does size issues mean slow responses? In other words what is the shortest time frame such traders can think in terms of trading off?
Many of the big HF's are not much more than mutual funds in disguise/asset gatherers. It can sometimes take days, even a month to get into/out of certain assets. Some are so illiquid, there's no market for these assets if everybody heads for the door.
Maybe helpful to understand basic aspects : Competitive Algorithms for VWAP and Limit Order Trading http://www.cis.upenn.edu/~mkearns/papers/vwap.pdf
Okay so there's one option I didn't know about, selling a block to a broker who then resells it. But how do you buy a block rather than chip away at the order? The MM's are running the liquidity. Can you deal directly with them? There's gotta be a smarter way than managing it on Lev2? I have done that in the past but you can't watch for other trades because your time is taken up getting in or out. If you are running a large fund and you have a big spread of shares what are the options? Get someone to write an algo so the PC chips away at the order without showing your intentions? I am only talking of large caps to minimize liquidity problems as much as possible, especially if the fur hits the fan. And how do you get block trades off on the ES to hedge a position?
You don't need to create a special algo, there is already a whole bunch of different algos designed for different objectives, and all insitutional brokers have them. Of course there are times when not even an algo is enough, in which case it requires patience and, as previously pointed out, it can take days or even weeks to get in/out of a position.
Thanks MTE. My quandary is whether to have a bunch of traders just trade and and bunch of monkeys manage the orders to keep the sizes within the bounds of day trading or go for fewer but larger positions. The thing I don't like it working an order for more than a day in today's world let alone working an order for a month. You can be a great trader and look like an idiot if you see a major reversal and can't get reversed and then it turns into a black swan. While I could hopefully hedge some of all of the position, having to have that capital tied up in reserve reduces the returns. So are my alternatives to hire a bunch of traders and monkeys for short swings or do it myself and go big on few stocks and take weekly swings?