Mmmmm ... hedge funds eat plankton traders!
Has you experienced it? There you are, watching your favourite stock tick by tick on the live screen, patiently waiting to make your move, and make your pay for the day. You've been taught to be unemotional when day trading, to listen to what the chart shows rather than what others say... to stay alert and only press the tigger upon seeing a holy grail pattern.
This day, your stock makes a typical opening bell dramatic move up. You know better than to chase it: "Those darn market makers and specialists are dangling a carrot in front of me, no friggin way! " you exclaim to yourself. Ten minutes later, the chart tops, and black candle sticks appear, one after another. "Mmmm, a retracement," you mutter to yourself, "let's see if this is the real thing now."
The black candlesticks trace off into small bars of white and black. The chart is moving sideways with small ups and downs in a consolidation pattern. "Volume drying up," you observe as you munch a dry sandwich for lunch while continuing to monitor the chart intently.
How time flies when daytrading! You need to stay conservative so as to protect your capital yet, you need to take risks to make your earn for the day.. an oxymoron indeed.
3 p.m. comes around. "Ughh!" you sigh, "can I make a trade today or what?"
Suddenly, a white marubozu appears! It keeps getting taller, with increasing volume! Your heart thumps with excitement, as adrenaline rushes through your body and you prepare to do battle. The next bar shows a white spinning top, a short breather show of indecision. You set a buy stop as an early move, and it got hit by another rising white candlestick. "OK, I'm in!" you scream!
Two more beautiful tall while candlesticks, and you're feeling on top of the world. Traders start piling in, feverishly hitting their buy keys. The stock has moved ... something big is happening!
Then you see the start of the next bar...a flat whisper of a red candle stick. "No stock goes up without taking a small rest," you say to yourself.
But, even before the sentence has left your breath, the volume bar starts clicking up furiously together with the ever redder and taller candlestick. Another, another, and another follows! Within 10 minutes, it is all over. The selling spree took care of the gap up in the morning plus 3 points more. Your stop gets hit with a bad fill.
Just another easy day for a hedge fund. Sell the inventory and sell them fast. Take out the traders lining up on the bid side. Take out the stops set by the day traders. Dry up demand during a 10 minute period. Set the tone for the next day so as to re-stock inventory.
Stock continues lower at a slower pace. Traders continue to capitulate on the ask side, one after another. Hedge funds re-stock their inventory in preparation for the next feast. Just another day in the office.
They eat up the planktons... it's as simple as that! |
