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traders into the arena has the effect of sucking up liquidity almost instantly. If three market makers are on the inside ask price and twelve electronic traders try to buy at the same price, the price level can quickly be absorbed. The antidote is for the DAET trader to be more anticipatory in trading style rather than waiting for "just one more" price movement to confirm momentum. |
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Since it is almost impossible to know for sure whether a perceived move is the beginning of a significant trend or just a jiggle, the DAET traders must act on their best judgment and hope for the best. If you get jiggled out, so be it. Persistency and discipline must always be maintained. There will be days when you get wiggled and jiggled like crazy, but that is a reality and a cost of doing business. On balance this reality, if handled with good business sense, can be kept under control and does not deter the successful DAET trader. The overall advantages of DAET trading significantly outweigh the difficulties created by the wiggles and jiggles. |
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Head fakes are a problem similar to wiggles and jiggles. Whereas wiggles and jiggles are created by routine market-maker actions that have come about through their increasing experience in dealing with DAET traders, head fakes seem to be more deliberate. Head fakes are movements by a market maker or market makers (sometimes in concert) designed to create an illusion to induce market participants and the DAET trading community to take an action (i.e., buy or sell). For example, if a market maker wants to create selling (the market maker is really a buyer), the market maker would have a few market-making "friends" initiate a downtick at about the same time. This gives an illusion of weakness, and there is a good chance several DAET traders would be induced to sell shares into this staged decline. |
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After the selling is completed, these conspiring market makers would quickly reverse the trend and "catch" the |
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