The Obscure World Of Professional Traders

There are 12 distinctly different Market Participant Groups.  Each group has an entirely different perspective, goal, amount of capital to invest, instruments, order types, routing, speed of execution, venues for trade execution–Dark or lit, Market Maker systems–intent of the stock investment or trade, mitigation tools and instruments to lower risk factors, and much more.

Most retail traders only know about  “Wall Street,” which is a very small number of Money Center Banks and Giant Financial Services companies such as Goldman Sachs. “Main Street,” then, includes small-lot investors, investment groups, retail day traders, retail meme stock traders, and Small Asset Management Fund companies with less than $3 billion in assets under management.

What you never hear about are the true Professional Traders of the stock market. Some work for the Sell-Side Institutions, others work for the Buy-Side Institutions, while many are independent Professional Traders who trade for themselves or a small company of traders.

The Professional Traders are the best traders in the world. No matter what style of trading you want to do–day trading, swing trading, Platform Position trading, Options, etc.--these groups are a huge benefit to your trading IF you can identify their unique footprints in the stock charts you use.

Of all the Market Participant Groups, the Professional Traders can be the source of the most powerful analytical tool you have at your fingertips. You don’t need any additional gadgets to see them, you just need a new way of studying technical chart patterns. 

Today’s Cycle of Market Participants - drawing created by TechniTrader®

Most Professional Traders encourage upside momentum action by nudging a stock price upward after the Dark Pools have been accumulating a stock. The “nudge” is always a small candlestick and can be confirmed by using Hybrid Leading Indicators that signal momentum before the stock moves with momentum. 

The Professionals are enticing the High Frequency Trading Firms (HFT), which are completely automated mega computer systems that use algorithms based on popular technical patterns as well as news, such as earnings reports, to gap and run a stock.

The HFT will gap a stock when it picks up a Professional Trader block sale that triggers the algorithm searching for the high liquidity draw that precedes momentum runs. The HFT fills the queues ahead of market open with thousands of small-lot orders that trigger the automated computer Market Makers to gap up that stock based on pre-market-open order flow. At open, the stock gaps, often hugely. HFTs quickly cancel any unnecessary orders. Professional Traders close their positions rapidly, netting huge profits on the trade. Professional activity is not always shown on the exchanges.  Much of the large lot and block orders are filled in non-lit Alternative Transaction System (ATS) venues.

Professional Traders start selling for profit as soon as they see the flood of retail day traders chasing the stock up. Pros are the first in and first out. Most retail day traders are the last in and last out, with losses all the time.

Meanwhile, in the event that the huge block order risk needs to be mitigated, the Professional Traders will use one of several instruments to mitigate their risk. Option Puts are one of those instruments/tools that professionals prefer to use to reduce risk with minimal expense, similar to an insurance policy.

Therefore, a sudden rise in Option Puts is often interpreted by the retail side as: “The Options market thinks the stock market is going to go down.” WRONG. This is FALSE information.  A high number of Option Puts is often Professional Traders using options as an insurance policy for a huge block order they are swing trading to the UPSIDE.

Another myth: Professionals are not day trading but swing trading most of the time. They gave up day trading years ago. With millisecond transactions from HFTs, other high-speed routing systems and unlit Dark Pool Venues, most professionals now swing trade, which holds stocks for a few days to weeks. Swing traders can make a lot of money, especially during earnings season, if they can learn to follow the footprints of the Professional Traders. 

The quantity of misinformation, misleading information, false information, and manipulation of information on the retail side of the market is unprecedented at this time. The SEC is developing regulations and governing oversight that will be mandatory for all Social Media some time in the next few years. Providing the general public with false information is already against SEC rules. Enforcing these rules throughout Social Media is a massive project. But it is underway.

To learn more about how Professionals trade the stock market to make their infamous 7-digit incomes, visit www.technitrader.courses. 

Martha Stokes, CMT

Image sourced from Shutterstock

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This contains sponsored content and is for informational purposes only and not intended to be investing advice.