Wednesday

Role of the Trader: taking the other side of emotion fuelled price movement

As a discretionary intraday trader, my role is to provide liquidity to traders on the wrong side of emotion fuelled price movement.
To understand this further, a legitimate knowledge of how markets operate is needed.

Market Mechanics:
  1. The market is an ongoing auction facilitating price agreement between buyers and sellers.
  2. At any specific moment in time, there is a fixed number of buyers and sellers.
  3. Movement in price engages auction participants, momentarily creating imbalances in supply and demand.
  4. Auction continuity is maintained by recycling traders. Forced out of their positions, traders rejoin the auction creating the fuel necessary to ensure continual ticking-over of prices.

Summary
Traders on the wrong side of price movement find themselves competing for queue position as price moves rapidly to absorb the influx of exit orders. It is during these moments that as a trader, I can serve trapped traders by providing them liquidity.