Secrets of the Elite Traders
SECRET #1: THERE ARE NO GIFTS ON WALL STREET
There aren’t many certainties in the bigger game of life. Death and taxes are two things that immediately come to mind. One can say that another certainty is change. But when it comes to the smaller game of trade or market, the only certainty we can bet on is the simple fact that there are no gifts on Wall Street.
If you think that you have been lucky with a trade, time will usually show that what you initially considered lucky is actually bad luck. Take the trader waiting to enter a running NASDAQ stock after most market makers have disappeared from the inner bid price. If the trade is filled when there are only one or two market makers left on the offer, it is almost certain that the trader didn’t really want that.
Whenever you think you’ve been given something, chances are you’ve been given something, might be something you actually don’t want. This is comparable to receiving a gift that you don’t really enjoy.
And the simple truth is that no one on Wall Street will give up anything for free. Yes, there will always be mistakes, even if they are made by the most astute. And yes, there will always be the ignorant who constantly buy and sell goods at the wrong time. But the knowledge and use of these events is what professional action is all about. It’s very different from what you think is a gift. It means the happiness of receiving something you know you don’t deserve. That’s what the trader has to consider.
In other words, profits and/or opportunities are taken on the market and not given. If someone gives you something, it’s probably a hot potato that you should immediately pass on to someone else if you don’t want to be burned. That may not make you feel very good, but the Darwinian law on Wall Street is the survival of the wisest and cleverest, not the survival of the luckiest. Take what you want, but don’t accept gifts. You don’t exist, at least not on Wall Street.
Elite – Trading Tip
If you get something you know you don’t deserve, it’s probably a trap. Always be skeptical if something is too good to be true. Here are some examples of possible negative warnings that are passed on as “gifts”:
- Your bid is placed below the current market price (you buy). This means that someone wanted so much out of the stock that they were willing to sell it below the current bid price. While most beginners would be thrilled, the Elite trader immediately becomes skeptical. The fact is that this person may know something you don’t. If this is the case, be vigilant and ready to get rid of the stock at the first sign of trouble.
- Your offer is made above the current market price (you sell). This is exactly the opposite of the previous scenario. It means that someone was so afraid to get the inventory they were willing to pay for. This could very well be a beginner who doesn’t know what he or she is doing, or an enthusiastic trader bitten by the greed bug.But there are times when those who are willing to pay above the current Ask price are real professionals. If they want all the stocks available in the current range, they will be willing to buy above the market. This means that the stock is probably about to explode upwards. We recommend to prepare to aggressively buy back into the stock when this happens as a result of professional positioning.
- A market maker is on offer (ask price) that is small in size and you are still being filled at dazzling speed. This often means that the image of strength being promoted is not really strong.
Let’s look at an example. Four market makers offer $45.00 for one share and only one market maker offers $45.25 for 1000 shares. At first glance, the stock looks strong because four people are willing to buy for $45.00, while only one market maker is willing to sell. However, many transactions run out at $45.25, yet the market maker stays at $45.25. Note: This means that the market maker “updates” his offer.
Amid the turmoil of trades starting at $45.25, you place a buy order for 1000 shares at an offer price of $45.25. You are immediately filled. While a beginner trader might be lucky enough to get the stock at $45.25, the Elite trader would immediately become skeptical. At some point, the Elite trader’s skepticism would lead to an immediate offer of these shares for sale at $45.25 or even $45.32.
There are of course many more scenarios, but we are sure you have understood the point.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. All information on this website is for educational purposes only and is not intended to provide financial advice. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold this information harmless in any and all ways.
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