Can MM's buy and sell to themself? If so, isn't this 'artificial volume' and 'artificial price movement', and occurs during slow periods, correct? If this occurs, how can one be sure of any 'true' price / volume / pattern / day's average trading volume? What internal and external regulating factors affect mm behavior? and finally, If we can 'see' mm's via Level II (not that I use it), is the opposite possible for mm's to identify a traders 'potential to make a trade' and see the opposite direction back to a traders platform via the point and click pipeline electronics? Thanks for any insight.
Apparently there are 'dumb questions' by the enthusiastic response. I'm sincere in my asking, and would appreciate your shared knowledge.
no they can't and won't Market makers are like amusement ride operators. Sure they can make the ride go faster or slower for no reason sometimes but they aren't going to do it much at all, maybe some punks are trying to mess around, they'll speed it up to make them throw up but if the ceo of the amusemenent park comes and takes a free spot check ride , he'll get fired immediately. So most of the times they'll be sitting there bored hitting Start and Stop.
You can trade with yourself on the CME Globex. I'm pretty sure they flag your account and if it happens enough times they'll say something to you. I'm not sure, but I imagine it is illegal.
Taking both sides of the same trade is a criminal violation of U.S. laws against manipulating the stock market. This law does not apply to GLOBEX, which is a market in commodities instead of stocks. Perhaps some equivalent provision governs commodities markets. It does sometimes occur. Sometimes, people arrange to sell stock back and forth, in order to deceive others as to volume or as to the true market price or value of the stock. Sometimes this is called "painting the tape." Sometimes it is done in order to manipulate closing prices, because these, in turn, can affect margin requirements or the values of option contracts. This is sometimes called "marking" a stock. Market makers do not have a way to monitor your trading station, through the internet, so as to anticipate your trades. Your broker, however, may collude with others to cause you to buy stock at an unfairly high price, or to sell stock at an unfairly low price. This is why you need to have an honest and competent broker, particularly in the area of order routing decisions and order execution generally.
Thanks for the replies! You know, in these days of 'Enron' and the Iraq war, I can only be suspicious at every level as to mechanisms that may abuse their power, from my computer box, to the software, broker, mm... Any weak link is an opportunity to exploit. I only have a few years experience trading stocks, 200 shares a position average. I just have observed so many suspicious price manipulations relative to my entry and exits. Because I trade such a small position, but have noticed plenty of 'reaction' to entry and exits, I have to ask myself 'how important is a measly 200 share position amidst an ocean of 300k plus volume? When larger volume orders are preceding my entry or exit, and the price activity pauses, or increases as a result of my entry or exit, I have to determine 'why' this could be, as 200 shares 'should be' nothing...causing no reaction. Or so one would think. So many on these threads talk about algorithms which are causing 'their stratagy' to stop working, as if 'their stratagy' has been figured out specifically, ie some computer is watching. If that was true, then the data gatherer computers that be must be watching in one form or another to get their edge, and it just seemed to me that looking up the pipe to see your cards (watchlist...platform movement) would be the perfect preemptive action for 'data gatherers'. People break rules all the time, so regulations tend to mean, 'don't get caught'.
Your observations can be explained. You are what is often called "dumb money" or part of "the crowd". The "dumb money" tends to act as sheep in a herd, in a somewhat predictable fashion. The "smart money" has a limited ability to predict what the "dumb money" will do; for example, where the "dumb money" will place their stops. The "smart money" can predict your actions, not as an unobservable isolated individual, but because you are running with the herd. The herd is observable through the market's normal fluctuations. Your lack of awareness, that you are running with an easily observable herd, creates the illusion that you are being monitored as an isolated individual.
I think, on second thought, a better way to explain your observations, is that it is the fundamental nature of markets to trick most people into doing the wrong thing at the wrong time. The market is not reacting to you, an isolated individual trading small positions. You, without realizing it, are reacting to the market in such a way as to produce the phenomena you describe.
bingo, jim it never ceases to amaze me how bad trading is so often written off as "MM manipulation" and other such rubbish. do MM's play games? yes but there is only one thing that moves stocks. more supply than demand or vice versa at the given price.
Great points, bingo and yahtze too, since equally if not more prevalent I think is how poor trading is written off as "specialist manipulation".