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ketplace to turn their order into a trade, or there's not going to be anything there at all. If there's no contraorder (opposite side) available, their orders will either be kicked out, depending on the type of order they're using, or they will be put into the order book. |
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The big difference can be seen in a commodity example. Archer Daniels Midland trades in illiquid issues (grains, for instance), and they're working a thousand to buy. They don't just put the order in the crowd blindly; they usually give it to the best broker to work it, and that broker will nibble and take and nibble and take so as not to disturb the price too much. On the screen, the same thing will happen. They will have price points where they would be interested in buying a thousand, regardless. They might put their 50 lots or 100 lots in and nibble and take from the rest of the orderflow. Then, the Ma and Pa Kettle orders will seek that level. But, as the price runs up, alerts and alarms on trading terminals will be set off and supply will come to the market because the prices are outrageous. |
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Now that sounds like a volatile and loopy market, but the reality is that a lot of people are not going to wait until those alarms go off, and they will have their orders in the marketplace. So you have a very deep and rich string of sells cascading up in price and buys supporting down, depending on the productand I'm talking futures. Options trading is different altogether. You'll see a fair and orderly market most of the time, but there are times when there will be gaps and people won't be sure which way to go or what values to use. |
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Neal: Your classroom teaches institutions. Where does a small trader go to learn this? |
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Tony: If it is a novice trader and he uses "the friendship network" to make money, he'll need to be retooled and taught the different strategies that will work on the screen. If it's an old-timer, like us, maybe someone who's had a lot of experience doing a good job down in the crowd, the learning is another dimension in the business. For instance, in futures trading, the |
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