# Institutional Trading Techniques



## Dominover (26 May 2016)

I have always wondered about something.... What methods do institutional traders (from Investment Banks or Hedge Funds) to trade stocks?

I always thought they would have to justify their choices of trades by tying each trade back to some solid science. I can't imagine they would say that they saw the 'head and shoulders' pattern and bought on that basis. 

Do they use Charting. If so, do they do this by looking at charting patterns or other acceptable techniques?

Also.. Do they only follow the day to day news and react like everyone else? 

I'm curious as to what is considered an acceptable method used in trading in reputable institutions?

Is there any book recommendations which walk you through how institutions go about this kind of thing?

Thanks


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## skyQuake (26 May 2016)

Dominover said:


> I have always wondered about something.... What methods do institutional traders (from Investment Banks or Hedge Funds) to trade stocks?
> 
> I always thought they would have to justify their choices of trades by tying each trade back to some solid science. I can't imagine they would say that they saw the 'head and shoulders' pattern and bought on that basis.
> 
> ...




Most are fundamental based. If your positions are many multiples of average daily volume you'd better be very certain about your bets. Slippage to get in/out are HUNDREDS of basis pts.

There's also a few momentum/catalyst/hft players that will get in and out more often, but they're usually more wide than deep.


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## Gringotts Bank (26 May 2016)

Dominover said:


> I have always wondered about something.... What methods do institutional traders (from Investment Banks or Hedge Funds) to trade stocks?
> 
> I always thought they would have to justify their choices of trades by tying each trade back to some solid science. I can't imagine they would say that they saw the 'head and shoulders' pattern and bought on that basis.
> 
> ...




I've no personal experience, but you can read Market Wizards to get an idea.  Quite varied.  Some smaller Australian funds do manual trading, just like us.

If a fund has an interest in small companies, it will use bots to manipulate the price.  To see this in action, just place a buy order on the top bid line, and if you are first in the queue the price will move away from you.  Or place a sell order on the top offer line and watch the price move down away from you.


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## skyQuake (26 May 2016)

Gringotts Bank said:


> If a fund has an interest in small companies, it will use bots to manipulate the price.  To see this in action, just place a buy order on the top bid line, and if you are first in the queue the price will move away from you.  Or place a sell order on the top offer line and watch the price move down away from you.




Triggering stops and inciting panic are all part of the playbook when they need to get some shares 

http://www.theaustralian.com.au/bus...e/news-story/8d1f27fa257d149176e38491a17db210

Though ASIC's crackdown recently will probably dampen some of the more visible tactics


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## Gringotts Bank (26 May 2016)

skyQuake said:


> Triggering stops and inciting panic are all part of the playbook when they need to get some shares
> 
> http://www.theaustralian.com.au/bus...e/news-story/8d1f27fa257d149176e38491a17db210
> 
> Though ASIC's crackdown recently will probably dampen some of the more visible tactics




Sounds like a good read.  I guess they won't allow you to copy/paste it to here?


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## skyQuake (26 May 2016)

Gringotts Bank said:


> Sounds like a good read.  I guess they won't allow you to copy/paste it to here?




Didn't realize it was behind a paywall. Although if you google "regal funds syrah" you can click the link and it wont be paywalled


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## Gringotts Bank (26 May 2016)

skyQuake said:


> Didn't realize it was behind a paywall. Although if you google "regal funds syrah" you can click the link and it wont be paywalled




Thanks for that.  Good reason to have http://www.shortman.com.au/ in the favourites, although there is a delay built into the reports.  

excerpt:

"Regal, a multi-award-winning fund manager with a top reputation among investors, is believed at the time to have been unable to lift its holding because of the tight share register.

Regal’s hedge fund, the Australian Long-Short Fund, is understood to have been short-selling the stock at that time in big quantities, taking Syrah’s share price down from $3.00 to $1.70 over eight trading days, without actual news to move the stock.

The drop caused shareholders to lose more than $30 million in capitalisation. The share price has since recovered to just under $4."


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## fxtraders (29 May 2016)

Dominover said:


> I have always wondered about something.... What methods do institutional traders (from Investment Banks or Hedge Funds) to trade stocks?
> 
> I always thought they would have to justify their choices of trades by tying each trade back to some solid science. I can't imagine they would say that they saw the 'head and shoulders' pattern and bought on that basis.
> 
> ...





It's Arbitrage, cash future arbitrage.
Most banks uses hft, exchange give rebate on volume.
Future traders use Order flow.
lot of 'em uses Multi Time Frame .. mtf can be applied on different indicators, so it's personal choice of trader working there. Of course capital allocation is there.
and there're few ones , that follow latency, few things (strategies) are hidden from public,it's one of them. 
I can't share all, but Yes, Upper ones are used .


and Yes, above all, Fast datafeed.. i guess you know about lease lines , Ip address not subnetted for that firm , Yes ofcourse it's public ip address, 
In short, they uses strategies most of public don't aware of .
You know that you need edge in market, they have it. 

bit off topic:
If someone is good in that firm, he does need extra skills like networking, they are not arrogant in this matter. they are very open for networking, Yes it's not easy to leave ego! you have to ! If you wanna be there
regards
 mtftrader


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