Decks, not stacks. Paper orders were held in a "deck". Generally folded in half to conceal the order.My understanding is that in the "old days", the stops came in over the phone to the trading floor. So everyone knew where the stops were - I think they were called "stacks" as they were literally stacks of paper orders
Nowadays, as @dozu888 said, it's pretty obvious where stops are and a single trade of 100 shares (or sometimes even dropped bid) will start the domino effect.
DOM
- Thread starter bloomberg1
- Start date
As Dozu says, Pro's aren't stupid, they know where Retail will place there SL's, they know how to take retails money on mass, that's where they make there money, not off each other, but by taking a slice of retail pie.
Why do you think, market often reverses right after your SL's been hit and sometimes thats a trap aswell, it's going back up, back in and back down again SL hit again.
We are playing against a highly trained and very clever opponent, there working together, we are all alone, guessing at best.
No shame in being beaten by the best thankfully
I'm curious, have you ever worked in an office with professional traders to know exactly or an area where retail trader will place their stop/loss protection at ?
I asked the above question because I've heard this myth too many times but its only by "retail traders". In contrast, I've never heard a professional trader say the same even a few that are my relatives and I hang out with...all of this via the Emini futures, Euronext CAC40 futures, Light Crude Oil CL / Brent Oil futures.
Maybe the myth started when stock traders (retail traders) assumed all of retail traders are using the same technical analysis involving support/resistance levels although retail traders do not use the same s/r levels.
Another issue, professional traders at firms do in fact lose money. In fact, many firms have lost so much money...they go under or get acquired by other firms that think they can fix a sinking ship.
Here's the fact, retail traders are not using the same s/r levels, not the same technical anlaysis, many do not believer in TA, many only use fundamentals, many do not use a trading plan...they are just shooting from the hip.
Simply, professional traders are not hard at work trying to figure out where retail traders are placing their stop/loss protection. In fact, this is the same myth I saw for the last 15 years by many others that do not believe in using stop/loss protection. Thus, they trade without using stops due to fear of having the professional traders steal their trades.
What about those traders that do not believe in using stops ? How will the professional traders know how many out there are doing such or maybe the reality is that they don't give a shit about where retail traders are placing their stops.
I've even heard about corruption within the markets...professional trading firms telling others where a bulk of stops are placed or algorithms guessing with high probability where stops are placed so that they can run those stops.
Yet, some of those firms involved in such rumors (e.g. Knight Capitol Group) loss so much money that they almost went out of business and eventually were swallow up by another firm wanting to right that sinking ship about Knight that was handling over +20 billion dollars of financial traders per trading day.
By the way, the firm that bought Knight (New Jersey firm) is based out of Chicago if anyone is curious to research it.
With the above stated, since this thread is about DOM or market depth...most DOM traders are scalpers or high frequency trading firms. In theory if you're scalping and using stops...you're competing with the best out there doing such and you do not have access to their resources nor their deep pockets to make a living within the realm of several ticks.
My point about scalpers...they use DOM or market depth and we all know (not a theory) that this is the playground for algorithms and their games. Therefore, maybe this myth is really about the fact that retail traders can not compete with Algorithm trading firms because of the costs involved, speed of the transactions, inferior DOM resources and so on...seldom to do with running of stops of DOM traders involved in stock trading.
I myself don't trade stocks but I do own stocks in long term investments in my pension and kids college education fund. You know...the story about diversification regardless if you're a part time trader or full time trader...don't put all your eggs in the same basket called day trading. Luckily I got that pension and long term investments going before the birth of each of my kids.
wrbtrader
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LOL. Thanks for correction - I was close - Making stacks off the decks
Because the PREM can't be changed without trading through or moving the bids/offers. The QUANTS are running the show now man. QUANTS are using 'optimal queue positioning' HFT algorithms to adjust and manage the PREM. This is what is creating the DOM.