Dark Pool Liquidity...
It never ceases to amaze me the lengths that people will go to in order to convince you that there is some deep dark hidden power in the markets that enriches those with lots of capital. There is no doubt whatsoever that these people will get better pricing than you when they buy or sell a financial instrument because they command much more capital.
However for the past few years I have openly said I would NOT want large capital to trade. It is simply too hard to make any sort of money in this low volatility environment which is not going to get any better any time soon. It is controlled by central banks at the moment (that is volatility measured by the VIX index which is at all time lows). This makes it very hard to get into positions and out of positions if you command larger capital. Inevitably you are more likely to lose money that to make any sort of higher returns.
If you don't believe me then do your own research on how well hedge funds have been doing over the past eight years or so. Most lose money.
They all have access to this so called "dark pool" of liquidity which exists of course in the shadow banking system.
Has it helped them at all?
The simple answer is, No it has not.
Unless you are buying stocks over the long run you have likely not made any sizeable returns for your investors.
Can you know with any certainty when these people are buying or selling. The simple answer is Yes you can but it happens very infrequently. The markets trend about 20% of the time or less. This is known. In order to catch a large move this way you need to have a system that loses most of the time and then capitalizes on the moves when they happen. There is no real way to know when these moves will happen. The SP500 will move up well at times or down well but this happens about once every 50 trading days. You can tell this by looking at the stocks that comprise the SP. However you want to look at the ones that are large enough that they control the pricing in the index. That is maybe three to four at the moment.
If the top three or four stocks are moving up or down solidly on any given day that is the day you can count on using multiple positioning and leverage. Unless this is happening then there is little to no need to do this. The reason is you are simply trading market noise.
So don't waste a lot of money and time thinking that you can find some hidden edge this way. If they can't find the edge, neither can you.
Simply be happy with a system that wins over 25% of the time and learn to let your winners run. This basic strategy has not changed over the years. It is still the same as it was one hundred years ago even with the algo and high frequency trading. I will teach you how to do this. Have a great weekend.
However for the past few years I have openly said I would NOT want large capital to trade. It is simply too hard to make any sort of money in this low volatility environment which is not going to get any better any time soon. It is controlled by central banks at the moment (that is volatility measured by the VIX index which is at all time lows). This makes it very hard to get into positions and out of positions if you command larger capital. Inevitably you are more likely to lose money that to make any sort of higher returns.
If you don't believe me then do your own research on how well hedge funds have been doing over the past eight years or so. Most lose money.
They all have access to this so called "dark pool" of liquidity which exists of course in the shadow banking system.
Has it helped them at all?
The simple answer is, No it has not.
Unless you are buying stocks over the long run you have likely not made any sizeable returns for your investors.
Can you know with any certainty when these people are buying or selling. The simple answer is Yes you can but it happens very infrequently. The markets trend about 20% of the time or less. This is known. In order to catch a large move this way you need to have a system that loses most of the time and then capitalizes on the moves when they happen. There is no real way to know when these moves will happen. The SP500 will move up well at times or down well but this happens about once every 50 trading days. You can tell this by looking at the stocks that comprise the SP. However you want to look at the ones that are large enough that they control the pricing in the index. That is maybe three to four at the moment.
If the top three or four stocks are moving up or down solidly on any given day that is the day you can count on using multiple positioning and leverage. Unless this is happening then there is little to no need to do this. The reason is you are simply trading market noise.
So don't waste a lot of money and time thinking that you can find some hidden edge this way. If they can't find the edge, neither can you.
Simply be happy with a system that wins over 25% of the time and learn to let your winners run. This basic strategy has not changed over the years. It is still the same as it was one hundred years ago even with the algo and high frequency trading. I will teach you how to do this. Have a great weekend.
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