By Michael J. Panzner
To outlive within the jungle, you want to realize thesubtle nuances that sign risk and chance. that is the way it is inthe inventory marketplace, too. however the market's substantially replaced: followyesterday's indications and you will get eaten alive. the recent legislation of theStock marketplace Jungle systematically explains what is new -- and what itmeans to traders. Michael J. Panzner illuminates the impression ofchanging applied sciences, marketplace individuals, funding time horizons,speculative habit, investor psychology, chance personal tastes, pricepatterns, functionality metrics, and extra. For the unaware, those changesmake the marketplace way more treacherous. in case you recognize, they offerimmense possibilities. subscribe to those that recognize: learn this ebook.
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Additional resources for The New Laws of the Stock Market Jungle: An Insider's Guide to Successful Investing in a Changing World
Example text
A sudden surge can cause people to react abruptly and erratically. When there is a flurry of activity, they may withdraw bids and offers or reduce the size of outstanding orders, weakening support for current values. This sets prices up to slide easily out of equilibrium. Even though many operators are tuned in to the factors that can set off program or other arbitrage trades, wariness remains—large flows into or out of the market might mean something else. As recent history has shown, they could represent the fallout from an unexpected and unwelcome geopolitical event.
It is not unknown for hedge funds to pay one or two cents a share for domestic equity trades done through a full service broker, or even half as much—or less—to execute transactions by way of electronic trading systems. It is even possible to receive a rebate or credit for some orders routed through ECNs because those venues are trying to lure business away from traditional exchanges. This has had several effects. First, it has encouraged a pick-up in short-term speculation, because some of the dangers associated with trying to capture minor moves in the market have been reduced.
Action Point With the depth of available liquidity decreasing, average quote sizes getting smaller, and institutional activities becoming less 30 The New Laws of the Stock Market Jungle visible, it can make sense for individual investors to rethink execution strategies and trade smaller amounts than they used to when buying or selling stocks. While it is more labor intensive than the alternative, breaking a 5,000 share order—or one for a tenth as much—into five or more pieces can help to minimize slippage and reduce the incentive for short-term “scalpers” and others to step in front of potentially market-moving trades.