"Strong hands": Do they exist and how do they trade?

[logic_man]

Quote from Lucias:

This is so simple to answer. Yes, there are strong hands and no they do not trade algorithmically.

Strong hands by definition discount the price as meaningless and therefore are necessarily basing their trades on something other then price (other then price primarily). This may be a hypothesis, an if-then scenario, a belief about the fundamental market, or an anticipation of an event.

They are are "strong" hands because they do not feel the market movement means anything. So, if they are short they aren't going to sell as the market moves against them because they don't see that as meaning anything. It is easier to trade with a strong hand if one uses a risk controlled instrument such as an option or vertical spread.

The mentality of the best trader is be strong, unrelenting when right but give like water when wrong. It is as difficult as it sounds.

See, I think this is very much aligned to what I think the strong hand does. Defines a "point A" and a "point B" and treats everything in between as little more than noise or the means to an end. Only, unlike traders who are trading the noise as if it were signal, the strong hand knows where points A and points B are most likely to be by observing how the market's fluctuations unfold.

The ability to precisely define where in the market's movements that price "means something" on a given timeframe and to basically ignore price when it isn't at that point is the essence of a strong hand, in my opinion. Thus, by definition, a strong hand never overtrades nor misses opportunities.

 

[logic_man]

Quote from Zr1Trader:

I've always thought of it this way.


Strong hands are those who are currently in profit by a good margin be it bulls or bears at the time. The ones that have the money to add to their position from their current profits if price retraces and thus they are continuing the price direction in their favor.

I've never referred to strong hands on an individual basis, I've referred to it as whether the bulls or bears are winning in a certain time frame. Who ever is winning are the strong hands. Just the way I look at it...

There's certainly this aspect of it and, at any given moment, one would expect the open equity of a strong hand's positions to show a positive number. And, yes, there is a certain "collective" nature to the strong hands, since the market's a huge place and, despite all the claims that it's designed to fool the most people the most amount of the time, it's also designed to make a few select people extremely rich. Of course, the two are related.

 

[uexkuell]

How could "strong hands" (understanding this as institutions that want to build/sell big positions) not trade algorithmically?

Assume you are one of these people and you think you'd like to buy 10000 ES contracts.

Would it be wise to put 10000 into the bid?
Or to split this up into 10 times 1000?

If you don't want to let everyone know what you are up to it is absolutely necessary to cover your tracks.
That's done by using some algorithm that splits up the orders into smaller chunks in an intelligent way.

 

[zedDoubleNaught]

Maybe try looking at it as, What do strong hands want to do? How many options are available to them?
They might do more than watch and trade; they may also have a few options to encourage price direction. For example, while I have watch, wait, buy, short, hold, cover, exit, in reaction to price and volume and time (about 5-10 choices and inputs), they may have a lot more options and able to consider many more inputs. I think that's Requisite Variety -- more reactions to disturbances, and they might even be able to cause disturbances (ex the above post about shaking out weak hands). I don't think I cause disturbances because my orders are too small.
Basically the idea is get an estimate of how many inputs and choices and actions they would have to code for, and whether that is a reasonable number. If it's 50, that might be possible to code; if it's 50 million, that might be prohibitively expensive. More likely it's somewhere in between like 200, then it's a question of if it's better to code it (with development and maintenance costs), or get a human (with recruitment, training, and wage costs).
For strong hands I don't know, but I find something like indicator signals, it's better to use code, but for chart patterns it's better to use myself because, while theoretically possible, I can't code something that works as well and reliably.

 

[logic_man]

Quote from uexkuell:

How could "strong hands" (understanding this as institutions that want to build/sell big positions) not trade algorithmically?

Assume you are one of these people and you think you'd like to buy 10000 ES contracts.

Would it be wise to put 10000 into the bid?
Or to split this up into 10 times 1000?

If you don't want to let everyone know what you are up to it is absolutely necessary to cover your tracks.
That's done by using some algorithm that splits up the orders into smaller chunks in an intelligent way.

I'm thinking more about how they act prior to placing an order and what is their decision-making process, rather than how they'd then execute the order.

 

[logic_man]

Quote from zedDoubleNaught:

Maybe try looking at it as, What do strong hands want to do? How many options are available to them?
They might do more than watch and trade; they may also have a few options to encourage price direction. For example, while I have watch, wait, buy, short, hold, cover, exit, in reaction to price and volume and time (about 5-10 choices and inputs), they may have a lot more options and able to consider many more inputs. I think that's Requisite Variety -- more reactions to disturbances, and they might even be able to cause disturbances (ex the above post about shaking out weak hands). I don't think I cause disturbances because my orders are too small.
Basically the idea is get an estimate of how many inputs and choices and actions they would have to code for, and whether that is a reasonable number. If it's 50, that might be possible to code; if it's 50 million, that might be prohibitively expensive. More likely it's somewhere in between like 200, then it's a question of if it's better to code it (with development and maintenance costs), or get a human (with recruitment, training, and wage costs).
For strong hands I don't know, but I find something like indicator signals, it's better to use code, but for chart patterns it's better to use myself because, while theoretically possible, I can't code something that works as well and reliably.

I was thinking more of how they get into a position and how they hold on to it and how they exit. In terms of trying to "cause disturbances", that's a little outside of what I'm thinking, but that's just me.

Also, I would think that a strong hand's job is kind of done after they get into a trade, because they'd be "ahead of the curve" directionally, but to actually get to where the market was going would require that the latecomers get on board. Kind of like when Wayne Gretzky said he would "skate to where the puck will be", the strong hand is early to where everyone else eventually comes around to being, even without the strong hand doing anything else.

 

[Mercor]

If you are talking about "strong hands" for short term trading or "strong arm algo's" it is not about being able to withstand draw downs.
Algo's or HFT does not want to endure any negative expectancy or negative ticks. They want to get in, pop the market then have their outs.

Many Algo's serve the same function the local floor traders used do. At key points such as , pivots points, fib numbers, tips of flags, triangles, they muscle the market direction in their favor. including gunning for stops. This is the definition of a strong hand in short term trading. Some one needs to take the lead and break trend lines. Locals used to do this all the time, gang together and redirect the market, create momentum, then dump their position.