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dominover

Institutional Trading Techniques

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I have always wondered about something.... What methods do institutional traders (from Investment Banks or Hedge Funds) to trade stocks?

 

I always thought they would have to justify their choices of trades by tying each trade back to some solid science. I can't imagine they would say that they saw the 'head and shoulders' pattern and bought on that basis.

 

Do they use Charting. If so, do they do this by looking at charting patterns or other acceptable techniques?

 

Also.. Do they only follow the day to day news and react like everyone else?

 

I'm curious as to what is considered an acceptable method used in trading in reputable institutions?

 

Is there any book recommendations which walk you through how institutions go about this kind of thing?

 

Thanks

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Mits,

 

"The further a society drifts from truth the more it will hate those that speak it." George Orwell

in other words -

You are fkn despicable :rofl:

 

zdo

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I have always wondered about something.... What methods do institutional traders (from Investment Banks or Hedge Funds) to trade stocks?

 

I always thought they would have to justify their choices of trades by tying each trade back to some solid science. I can't imagine they would say that they saw the 'head and shoulders' pattern and bought on that basis.

 

Do they use Charting. If so, do they do this by looking at charting patterns or other acceptable techniques?

 

Also.. Do they only follow the day to day news and react like everyone else?

 

I'm curious as to what is considered an acceptable method used in trading in reputable institutions?

 

Is there any book recommendations which walk you through how institutions go about this kind of thing?

 

Thanks

 

Very very generally -

A large percentage (~80% ?) of institutional traders are bound in the instruments they can trade and have ‘someone’ they call every morning for daily guidance. For example, every institutional bond trader I’ve gotten to know has a ‘friend’ ( in Chicago or the Caymans or wherever) that they raise on the phone before acting. Individual traders ‘copy’ that by using advisory services.

 

Only a tiny percentage (~1-3% ? ) discover and create opportunities on their own. Individual traders ‘copy’ that by discovering and creating opportunities on their own... well duh

 

In the middle is that remaining percentage whose direction is set by management and they bring a competency at the level of portfolio management. Individual traders can ‘copy’ that by emphasizing portfolio structure and composition and sizing instead of focusing on trade selection...

 

 

I always thought they would have to justify their choices of trades by tying each trade back to some solid science.

 

At any level of trading, the narrative reasons given are rarely the actual reasons for trades taken.

...

What an 'institutional' trader tells his immediate supervision depends on their informal relationship... and what an 'institutional' trader tells higher mgmt. is likely different from what he tells his immediate supervision

 

I can't imagine they would say that they saw the 'head and shoulders' pattern and bought on that basis.

 

Do they use Charting. If so, do they do this by looking at charting patterns or other acceptable techniques?

 

...

 

I'm curious as to what is considered an acceptable method used in trading in reputable institutions?

 

After a couple of years, they can "use" any method they want as long as they are in the black. Actually, they can use "use" any method they want even if they are in the red - just not for too long with the original firm ...

 

 

Also.. Do they only follow the day to day news and react like everyone else?

 

 

Some do. Some don't.

 

Is there any book recommendations which walk you through how institutions go about this kind of thing?

 

Halfway through most any book you get on the subject you’ll probably realize you and the author were not sharing a common meaning for the term ‘institutional trader’ ... :)

 

Q: How do you think the unthinkable?

A: With an itheberg.

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"It's a club... and you're not in it" I rather like that statement. My data feed crashed a few minutes ago... I'm not in the club either.

 

When I was starting out, I had the same questions. It seems that someone would have written a book (or attempted to) about how institutional traders become traders. The ins and outs of institutional trading. I don't know of any such book...

 

If you take some time to consider the world of finance, I think you would realize that the details are complex and ever changing. There are so many different players working so many different schemes... how could anyone write a comprehensive book on the subject? I would assume (quite certain) there are confidentiality agreements that go along with being in said employment as well.

 

That said... there are a couple of books that come to mind. Though these books would be worth nothing more than entertainment value to you.

 

Jim Cramer / "Confessions of a Street Addict"

(author that can't recall) / "Liar's Poker"

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I have always wondered about something.... What methods do institutional traders (from Investment Banks or Hedge Funds) to trade stocks?

 

I always thought they would have to justify their choices of trades by tying each trade back to some solid science. I can't imagine they would say that they saw the 'head and shoulders' pattern and bought on that basis.

 

Do they use Charting. If so, do they do this by looking at charting patterns or other acceptable techniques?

 

Also.. Do they only follow the day to day news and react like everyone else?

 

I'm curious as to what is considered an acceptable method used in trading in reputable institutions?

 

Is there any book recommendations which walk you through how institutions go about this kind of thing?

 

Thanks

Institutional traders are of two sorts. Those that trade on fundamentals and those that use technical analysis. The fundamental determine the general trend and the technical determine the "path" of the general trend. That is, over the long haul the fundamental institutions determine the longterm trend and the technical institutional traders determine the shorter trends. Hft's are a type of institutional technical traders that micro scalp. Nearly all technical analysis is mathematical in nature. So yes, the technical institutions look at charts and trade patterns. They especially pay attention to support and resistance. Fundamentals pay more attention to value. When they think it is cheap they will begin buying in quantity. When they think it is overvalued they will begin selling. However, generally speaking, it is the technical institutional traders that drive the mark to the undervalued levels and to the overvalued levels. Institutions trading on value will load up their positions when they think the appropiate value has been reached. The markets move because of institutional size trading. The chart leaves their footprint. They cannot hide it. As Mit says "everything to the left in a chart is free info" it tells you what they are doing if you know how to read it. News, in general,m is useless because there is always a bearish interpretation and a bullish interpretation of it. Take the brexit thing. Bearish...now recovering...soon to be bullish..the charts will show it all and tell you all you need to know. Edited by Patuca

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They use an incredible amount of leverage (look at bank stocks roe and roa) beyond the next time there is another disaster that they need to be bailed out of, losing more money than they made since the last disaster. This is true in spite of the cheating, insider trading, and other, categorically, unethical practices. It's not about employing profitable strategies; instead, it's about putting as much money in your pocket right now with no concern for tomorrow.

 

You'd be shocked to see how carelessly these mega-$bilion institutions are managed. Pointing it out would get you fired.

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mm,

good post. yep

‘institutional trading’ after 1980 reminds me of

Of Two Minds - Governments Change, the Corporatocracy Endures

and

Cat's Cradle - Salient

 

beyond,

re;

"At least I know how mitsubishi feels now.. This still doesn't answer the question."

it appears dominover is looking for a description of pre 1980 ‘institutional trading’

 

 

patuca,

I disagree there are only two types of ‘institutional’ trader. I discussed a third type above - which if you have to have a single word for is best summed up as ‘narrative’ trading among networks (...to be clear - these narratives are NOT fundamentals. ...and btw, the real ‘narratives’ are rarely publicized... rather the financial media is complicit in generating false narratives. )

 

 

 

If we will be quiet and ready enough, we shall find compensation in every disappointment.

– Henry David Thoreau (1817 – 1862)

 

If we will be quiet and ready enough, we shall find disappointment in every compensation .

- zdo (1542 – 1636)

:rofl::rofl::rofl::rofl:

:rofl::rofl::rofl::rofl:

:rofl::rofl::rofl::rofl:

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mm,

good post. yep

‘institutional trading’ after 1980 reminds me of

Of Two Minds - Governments Change, the Corporatocracy Endures

and

Cat's Cradle - Salient

 

beyond,

re;

"At least I know how mitsubishi feels now.. This still doesn't answer the question."

it appears dominover is looking for a description of pre 1980 ‘institutional trading’

 

 

patuca,

I disagree there are only two types of ‘institutional’ trader. I discussed a third type above - which if you have to have a single word for is best summed up as ‘narrative’ trading among networks (...to be clear - these narratives are NOT fundamentals. ...and btw, the real ‘narratives’ are rarely publicized... rather the financial media is complicit in generating false narratives. )

 

 

 

 

– Henry David Thoreau (1817 – 1862)

 

 

- zdo (1542 – 1636)

:rofl::rofl::rofl::rofl:

:rofl::rofl::rofl::rofl:

:rofl::rofl::rofl::rofl:

of course you are correct. i didn't actually mean only two. You got darks..pools...trading on insider info...etc

 

I was speaking in general terms.

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