Monday, 28 November 2011


On the floor, the first reaction to a market pop like today was to sell it! But look at the title of this post. It has a question mark.

The question mark is because the markets have changed. The players have changed. The way they trade has changed. Markets feed on themselves more. It's more like pin ball game, as one set of big orders begets another set of big orders. In the "olden days", the locals and market makers (specialists) would pounce on the market and give it a lot of supply, satisfying the orders. No one group was that big that this strategy didn't work most of the time. On the floor, your friend the broker might give his local friend the nod to sell the last tranch of buying.

Not any more. The locals are gone. The specialists are gone. Markets are "managed" by pure order flow from HFTs, from hedge funds and other very big groups, often having to trade in the same direction for very short periods of time. So Newton's Law rules. A body continues until it is acted upon by an impressed force.

Where the market goes longer term is much harder to "predict". It's all money management and scalping. Everyone is a day trader.

Euro had a few nice trades today. The chart shows a final pop to the morning and then the negative order flow kept me out of trouble.

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