Your Trades Are NO Secret!
Every beginner trader dreams of beating the market. Of predicting trends before they materialise. Or concocting a winning formula that delivers a net profit every single time. Most of these remain simply as pipe dreams that never come to pass. But traders are human, and as humans we are compelled to find and create patterns everything we do. However many new traders are naïve enough to believe that their uniquely crafted trading strategies are a secret to the outside world!
Invariably, whether you’re a hedge fund manager investing millions in the market, or just another day trader looking to make your money work for you, we all have our strategies and little idiosyncrasies. But whether you’ve co-opted your ideas from elsewhere or if you’ve formulated your own personal strategy, once you place a trade, this information spreads like wildfire.
Most trader start off as retail traders and are extremely selective with their brokers. This is due to unethical brokers who might trade against you or “stop hunt” your trade to ensure most traders lose out. However, have you considered that even with an ethical broker, all your trading information is collected once you start trading with them?
How brokers use such information depend entirely on how ethical and how regulated they are. We know that brokers need such information to pass out trade to their liquidity providers, and some go the extra mile to showcase the percentage of buy and sell position of their client.
But we’ve also heard of brokers taking opposites side of trades against clients or even selling trade information to other financial institutes. Overseas broker usually look more attractive but this option might actually come with even less security as one might not be familiar with the regulation in other countries.
Your trade information doesn’t stop at the broker, it is also passed on to their liquidity providers. While liquidity providers such as bank and other financial institute might not have your personal trading information, they have the collective volume traded. And with collective information from brokers, financial institutes have a serious edge over retail traders.
Banks and financial institutes are big players in the market and when they trade to their benefit, your trade will most likely get caught in the crossfire. The average retail trader has nothing in his arsenal to match up against the big guns of the major players.
So how do you, as just one trader, overcome this David vs Goliath situation?
The first thing is to stop thinking on a micro level. The earlier you get use to the idea that your trades are not a secret to the outside world the easier it is to think from the perspective of major players. And once you are able to step into the shoes of the major players, it’s a first step towards making better decisions and trades.