Is this a Flaw in the Stock Market? | Summary and Q&A

18.4K views
December 15, 2023
by
Warrior Trading
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Is this a Flaw in the Stock Market?

TL;DR

The trader discusses the unusual trading patterns observed in special acquisition companies (SPACs), which experienced significant gaps and sell-offs with low volume, hinting at potential manipulation by high-frequency trading algorithms or institutional players.

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Questions & Answers

Q: Could you explain why the trader believes high-frequency trading algorithms or institutional players may be manipulating SPACs?

The trader suspects manipulation due to the sudden gaps and sell-offs in SPACs with extremely low volume, suggesting the presence of high-frequency trading algorithms or certain institutional players pushing the stocks up before capitalizing on the subsequent fade.

Q: How did the trader navigate the unusual trading patterns in SPACs?

The trader took smaller positions due to the high risk and poor liquidity in SPACs but still managed to make profits on bounce trades in certain cases. However, the trader remained cautious and acknowledged the need for a recovery period before getting aggressive with trading.

Q: What are some characteristics of stocks that the trader typically trades?

The trader focuses on stocks with news, relative volume of at least five times the average, and floats under 20 million shares. The trader also prefers stocks in the $2 to $20 range.

Q: How does the trader plan to recover from the recent losses?

The trader aims to gradually recover the losses by focusing on keeping losses tight and avoiding big red days. Once a significant recovery is made, the trader will regain confidence and become more aggressive in trading for bigger gains.

Q: How does the trader manage risk in their trading strategy?

The trader emphasizes the importance of managing risk and suggests practicing in a simulator before trading with real money. They also highlight the need to take it slow and not to get overconfident too quickly after losses.

Q: What impact did the lack of news have on the trader's trading opportunities?

The lack of news on Friday limited the trader's trading opportunities. The trader hopes for better trading opportunities in the coming days and encourages viewers to stay tuned for any potential news-driven stocks.

Q: What types of trading patterns does the trader prefer?

The trader prefers stocks that are in a range with tighter ranges being more profitable for trading algorithms. However, the trader also recognizes the potential for big moves and opportunities when stocks break out of their ranges.

Summary & Key Takeaways

  • The trader experienced consecutive red days in trading, with the biggest loss of the year on Wednesday.

  • The trader noticed peculiar trading patterns in SPACs, where the stocks would gap up significantly with very low volume, followed by sell-offs.

  • The trader discusses the possibility of manipulation by high-frequency trading algorithms or certain institutional players, leading to liquidity creation and selling opportunities.

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