Block Boxes, Volatility, and Manipulation

[fxpeculator]

Would like to know if any quants or traders on the board can describe the trading strategies that dominate the market, used as such firms hedge fund SAC which is about 5% of vol on NYSE.


What combinations of futures, equity baskets, and index manipulation and other weapons and strategies are used to take the market up, down, or glue it sideways in a tight range? How do funds and banks bully the market in a tight range?

In a detailed fashion, I am looking for some detailed explanations and hypothesis as to the latest block box trading strategies that is sucking the volaility up and running over many traders who play trends and coin more primarily in wet volatility environments.

For the indie and prop traders out there, I believe it is in our best interest to collaborate "within reason" to intelligently decipher what we are up against. It would only help if there is more color on the manipulation and black box strategies that dominate the market and sub markets.

This is not a loser framework: "Blame the hedge funds and Big Prop desk" thread. This is more of a "what the hell is going on" thread with the intention of enlightening the "Little" guy David as to the battleground landscape of the markets and the manipulative strategies of the Goliaths out there.

 

[FredBloggs]

merrills account for ~ 15% of nyse volume

gs for another 15-20% so sac (who ever they are) are small fry.


most institutions are using black box for efficient order execution of large commercial/fund orders rather than speculative operations. read up on the prime brokerage model for an idea of what the jackanory is.


also take a look at the cbot market profile handbook. even if you dont use mp, its an excellent base for understanding who the participants are and what their objectives are.

i guess youre just saying the markets are tough. i guess your trading the same old markets everyone else trades.

try something that isnt so liquid - youll find vol is a bit more interesting (ie dont be a sheep)




people bitch about liquidity like its the most important thing out, yet they are trading with < 10 lots where liquidity (getting your order filled) aint really gunna be an issue in most electronic markets.

 

[fxpeculator]

Liquidity and Volatility are 2 different things. Thanks for your input but I believe my question was over your head or you missed it.

Merrill is not creating strategies to spike, glue the markets into tight ranges, or tank the markets each day, they are rather robots fulifilling client orders. Also, there are too many risk management systems in place there to do the kind of bullying. index manipulation, and volatility sucking that goes on daily.


If you think CBOT has a clue as to what is "really" going on and the genius and manipulative strategies that are influencing and sometimes controlling the markets, I think you are way off.

Let me give you an example. In the fx market, a thomson financial fx analyst told me that he knew exactly how much it would take to move the dollar/yen 3 pips at a specific time in the asian session, meaning he knew exactly how much capital it would take to move the market and how much it would move it.

Or a bank in collaboration with a hedge fund client defending an option they sold to other players preventing the market from passing that level until the option has expired and the capital allocated to defend it has been used up.

There are mechanisms in place where the market is "fixed", like a slot machine in Vegas. Of course, You can walk into the casino knowing how to count cards at the BJ table or just pull down the trigger on the slot machines and hope for the best. I am more inclined for the former.

I am a profitable trader but with more information and more context as to the "real" and "ghost" market dynamics, this information would only help someone's trading depending on their style and system.

(1) Faking size on L2, (2) naked shorting, (3) intentionally paying a superior or inferior price for a stock to sweep and gun at stops and buying and selling into the covering or forced selling, etc (smalltime stuff vs unkown bigger and influential strategies)

CBOT is not going to know how a well capitalized, creative, bold, and aggressive manager with liberal risk management systems with a mix of NQ and ES, basket of DOW, Naz, and S&P stocks, can move the market or glue it into a range with more sophistication and less capital than you think, can run things for a X period of time in a market or sub market.

If someone could determine that 50% of players are doing this and 50% of players are doing that at any given time, a player could come in and tip a market providing a catalyst for upside or downside or if X players observed that forces were in place to keep a market from moving and glue it into a tight range, they could work with the other forces to support this range and manipulate and control the trading within the range.

As I stated, there is a lot to be learned about the markets and this is a "what the hell is going on thread" and I am confident CBOT, CME, or SEC,etc. or a common trader has no clue as to what is "really" going on.

 

[tomcole]

Grow up.

1. Stops are always run, sometimes you're on the wrong side. Big deal.

2. Institutions arent trading gods - they simply spook smaller traders into bailing out and eat up their capital in little bites. Grow some 'nads.

3. If anyone were to risk Fed regulatory wrath over manipulating the dollar, its an offshore firm. Heres an example - if I am a major importer, or export to the US and KNOW I have a gazillion containers coming in this year in August, say for Christmas sales, and the import number will be skewed, why not jump in front of the release knowing all the lemmings will run the market for me?

You have to be able to think when you trade, it isnt all computers beating up the poor little guy.

 

[fxpeculator]

Quote from tomcole:



1. Stops are always run, sometimes you're on the wrong side. Big deal.

I clearly mentioned this was the "smalltime stuff", your speaking of dynamics that "you know" of and obviously don't have an informative answer or theory for the original question
.

Quote from tomcole:


You have to be able to think when you trade, it isnt all computers beating up the poor little guy. [/B]

Obviously, your not doing too much thinking or your limited to thinking within the "known" parameters of the small "black box" in your head. Try stepping out of it sometime and see what happens.

 

[ratboy88]

Quote from fxpeculator:

Liquidity and Volatility are 2 different things. Thanks for your input but I believe my question was over your head or you missed it.

Merrill is not creating strategies to spike, glue the markets into tight ranges, or tank the markets each day, they are rather robots fulifilling client orders. Also, there are too many risk management systems in place there to do the kind of bullying. index manipulation, and volatility sucking that goes on daily.

merrill may be a little late to the black box party but they are not just filling customer orders..... did you see pisani's peice yesterday talking about this subject??? said hedge fund/traders were dying this summer, same as last, but that they didn't see any hope come fall this time. GS, Merrill, JPM, and ATD are the big players i know about.....

 

[FredBloggs]

Quote from fxpeculator:

Liquidity and Volatility are 2 different things. Thanks for your input but I believe my question was over your head or you missed it.

Merrill is n....

(yawn)

...g on thread" and I am confident CBOT, CME, or SEC,etc. or a common trader has no clue as to what is "really" going on.

errrr....

i think you should at least take the trouble to read the material i pointed to before dismissing it. you never know - you may just learn something! (like the answers to your questions) beware though. there are big documents to read, and i doubt a busy pro like you has either the time or inclination to do the necessary work.


(btw - have you ever looked at the career histories of any exchange directors and their personal financial interests - or for that matter investigated exchange rules vs market moves - no! i thought not! have you ever thought to ask your self who owns the exchanges? no, i thought not.)

 

[FredBloggs]

Quote from tomcole:

Grow up.

1. Stops are always run, sometimes you're on the wrong side. Big deal.

2. Institutions arent trading gods - they simply spook smaller traders into bailing out and eat up their capital in little bites. Grow some 'nads.

3. If anyone were to risk Fed regulatory wrath over manipulating the dollar, its an offshore firm. Heres an example - if I am a major importer, or export to the US and KNOW I have a gazillion containers coming in this year in August, say for Christmas sales, and the import number will be skewed, why not jump in front of the release knowing all the lemmings will run the market for me?

You have to be able to think when you trade, it isnt all computers beating up the poor little guy.

lol - exactly!

no wonder most traders want to keep their knowledge to themselves eh!

 

[ratboy88]

Quote from FredBloggs:


(btw - have you ever looked at the career histories of any exchange directors and their personal financial interests - or for that matter investigated exchange rules vs market moves - no! i thought not! have you ever thought to ask your self who owns the exchanges? no, i thought not.)

do you care to expound on this dynamic.... i for one would be quite interested.

 

[tomcole]

Well, I'll reply to your clearly antagonistic comment. At a macro level, I would fade every trade you enter, as you clearly lose money most days and have never been consistently profitable. Heres why-

1. Liquidity and Volatility are 2 different things. Thanks for your input but I believe my question was over your head or you missed it.

>>No one looking to establish a sincere dialogue writes this way.

2. Merrill is not creating strategies to spike, glue the markets into tight ranges, or tank the markets each day, they are rather robots fulifilling client orders. Also, there are too many risk management systems in place there to do the kind of bullying. index manipulation, and volatility sucking that goes on daily.

>>Unless you work at ML, theres no way for you to know this.

3. If you think CBOT has a clue as to what is "really" going on and the genius and manipulative strategies that are influencing and sometimes controlling the markets, I think you are way off.

>>Exchanges are comprised of market participants, hence this statement has to be false by definition.

3. Let me give you an example. In the fx market, a thomson financial fx analyst told me that he knew exactly how much it would take to move the dollar/yen 3 pips at a specific time in the asian session, meaning he knew exactly how much capital it would take to move the market and how much it would move it.

>>FX analysts are at the low end of the food chain. They crank out reports to be read by other low enders. Nobody cares.

A trading bank can easily move the market 3 pips by beeing seen as a buyer/seller, then flipping out their position. No big deal - dangerous trade as volume comes to volume, and they sometimes get crushed pushing the market around.

4. Or a bank in collaboration with a hedge fund client defending an option they sold to other players preventing the market from passing that level until the option has expired and the capital allocated to defend it has been used up.

>> This statement makes no sense whatsoever.

5. There are mechanisms in place where the market is "fixed", like a slot machine in Vegas. Of course, You can walk into the casino knowing how to count cards at the BJ table or just pull down the trigger on the slot machines and hope for the best. I am more inclined for the former.

>>Yet more silly comments

I am a profitable trader but with more information and more context as to the "real" and "ghost" market dynamics, this information would only help someone's trading depending on their style and system.

>>Profitable traders never talk about it, they simply say I've done this for x years.

6. (1) Faking size on L2, (2) naked shorting, (3) intentionally paying a superior or inferior price for a stock to sweep and gun at stops and buying and selling into the covering or forced selling, etc (smalltime stuff vs unkown bigger and influential strategies)

>>Again, all very different trades. This comment simply shows your lack of experience. Running stops, naked shorting, doing sweeps are all profitable, high risk trades.

7. CBOT is not going to know how a well capitalized, creative, bold, and aggressive manager with liberal risk management systems with a mix of NQ and ES, basket of DOW, Naz, and S&P stocks, can move the market or glue it into a range with more sophistication and less capital than you think, can run things for a X period of time in a market or sub market.

If someone could determine that 50% of players are doing this and 50% of players are doing that at any given time, a player could come in and tip a market providing a catalyst for upside or downside or if X players observed that forces were in place to keep a market from moving and glue it into a tight range, they could work with the other forces to support this range and manipulate and control the trading within the range.

As I stated, there is a lot to be learned about the markets and this is a "what the hell is going on thread" and I am confident CBOT, CME, or SEC,etc. or a common trader has no clue as to what is "really" going on.

>>A silly comment, again, showing your lack of understanding and participation. I think you'dbe much happier putting your money in a Fidelity fund.

If you're confident nobody but the boogeyman knows whats going on, why are you posting? Or are you hoping the boogeyman will answer?