I recently watched a video where a (supposed) successful and long time trader speaks about how he 'picks off' retail traders... He spoke about how retail traders trade in the wrong places, and how he and his institution buddies can see the retail guy trading in the wrong place, and how he and his buddies can single out the retail trader and force him out of the market. My BS meter went off the charts. Some highly liquid instruments can print thousands of trades inside a minute's time, how can anybody spot Johnny Retail amongst all the prints? Furthermore, on those liquid instruments, how are you going to move the market against Johnny Retail? On one hand I can understand how they could use TA to determine where people who believe in TA may place their trades. If they are the specialist making a market for ACME, then I'm sure they can cause some manipulation, but what about highly liquid instruments? Considering the random walk nature of the markets, can somebody explain how a specialist could see that I buy/sell a few hundred shares, or a few contracts, or a few 10ks in currency pairs, and how this big bad predator could 'prey upon', the little guy? It seems like a lot of nonsense to me....
It's actually pretty easy with options and stocks. My firm use to specialize in mid caps and we tore retail guys to pieces. It wasn't "one" guy but in the aggregate and it was with listed stocks not nasdaq. With futures guys use to do it by spoofing. Spoofing only catches retail guys, institutions usually don't fall for that big bad bid or the big scary offer like the little guy does. There are so many tricks. It's really about the little guy not being able to control himself or his emotions and the institutions know that. It's not really shocking. Does it happen much now? Probably not, little Johnny retailer is back at his old accounting or IT job and doesn't trade much anymore. But back in the day, yeah it was a free for all.
Thnx. Honestly, I think the name of the game now is picking off CTA's and maybe algo hunting the algos. It's pretty sophisticated and the prey is not as easy now as they were back then so it's more of an equal battle now. I highly doubt anyone has the desire to "pick off retail schlubs" in today's market. You have to remember in the old days, most retail platforms were really basic. Hell when I first started trading I wasn't even using real time quotes! You had to pay extra for that. LOL. Now even if you can't add one plus one, platforms like TOS will give you the mid price on an option spread that proved mathematically challenging for the hobbyist trader of yesteryear. The game has really changed. And with the easy money retail folks gone, so are the predators who use to prey on them. I suppose in the penny stock land there are still some fun games you can play....
Curious, how do you think they are hunting CTA's? There are many different strats a CTA may be running. Unless they are scalping, which I would think is a waste of time as a CTA, they should be looking for larger swings.
Trendfollowers. Look at any commodity in a long smooth trend. When they break they have insane pullbacks that comes from the liquidations of these trend followers. I use to track a lot of trend following funds and they would be up 30% to 40% on the year. I would look at what they were long and then see how their numbers looked after the trends broke and they would go up from being up 40% to up 3% in the matter of month from the liquidations. I think a lot of algos front run them on the commodity side, doesn't work so well on the stock side.