tactical trader

The nemesis of most traders is that of stop running. Stop running is rampant on the 60 minute FTSE 100 chart.

What is stop running and what should you know about it?

There are two points of view with regard to the term called stop running:

1. The point of view of the market makers (we’ll call them sharks).

2. The point of view of the small fish on which the sharks dine.

Who are the sharks and who are the small fish?

If you are an individual trader, as I am, chances are you are one of the small fish. What happens to us is something we call stop running or stop fishing.

If you are one of the sharks, a market maker or market mover, you have sufficient power to move prices, your name for the activity the small fish call stop running is order filling.

I don’t want to belabour the point of identifying exactly who the sharks are, or to delineate exactly at which point a small fish grows and becomes a shark. Suffice it to say the sharks are the ones who do the stop running, or is it order filling? — it really depends on your point of view.

The basic purpose of a market is that of filling orders. It is a place in which you can buy or sell. If the buying and selling is easily done, the market is said to be liquid. The sharks are those who make it their business to see to it that all orders within reason are filled. They want the market to be liquid — it makes it easier to find a meal. In that sense, whether officially or unofficially, they behave as market makers. It is to their benefit to see to it that as many orders as possible are filled.

We can look at it this way, the more the market makers are able to fill orders, the more there is liquidity, and the sharks love to swim around in the liquid seeing how many orders they can snap up. From their point of view that is their designated role — that of filling orders. When your order is in the market it becomes potential food for the sharks. If you place your order in the market within reasonable reach of the sharks, they are going to eat…uh…fill that order…