Please explain this further. The market makers, un
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Posted On: 04/05/2018 3:41:33 PM
Please explain this further. The market makers, unlike us small traders, can see the stop-loss orders in their order books. If they want to take out stop-loss orders, they can simply walk the stock down, take them out, and then let the stock come up again. They have a profit on the stock they bought via the stop-loss order at a low price, and then sold at a higher price.
How does having orders down there help them do that in any way, given that they can do that at any time? In fact, if those stop-loss orders are below the "floor" price, the low-priced orders PREVENT them from taking out those stop losses.
For instance, let's say bid is .545 and ask is .56, as it is right now.
Let's say there is a stop-loss order at .45.
And let's say there is a low-priced order at .48.
How can you say that the low-priced order at .48 is HELPING the market makers take out the stop-loss order, when to do that they would first have to FILL the order at .48? In fact, the order at .48 is a blocking order which makes it expensive for them to take out the stop-loss order.
In reality, when you buy at the ask, it gives them an incentive to put an artificially high ask there, so that they can fill it by shorting it to you ("to make an efficient market" ) and then buy it back at a lower price.
Your quote:
How does having orders down there help them do that in any way, given that they can do that at any time? In fact, if those stop-loss orders are below the "floor" price, the low-priced orders PREVENT them from taking out those stop losses.
For instance, let's say bid is .545 and ask is .56, as it is right now.
Let's say there is a stop-loss order at .45.
And let's say there is a low-priced order at .48.
How can you say that the low-priced order at .48 is HELPING the market makers take out the stop-loss order, when to do that they would first have to FILL the order at .48? In fact, the order at .48 is a blocking order which makes it expensive for them to take out the stop-loss order.
In reality, when you buy at the ask, it gives them an incentive to put an artificially high ask there, so that they can fill it by shorting it to you ("to make an efficient market" ) and then buy it back at a lower price.
Your quote:
Quote:
When MMs see there are many buy orders waiting at 50 cents or lower, they'll look to take out stop-loss orders. That's one way and I'm sure there are others. Oftentimes we see a sharp drop followed by slow recovery.
Read More: https://investorshangout.com/post/view?id=499...z5BpR1HgBk
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