Can Momentum Traders Cause a Drift in Prices?

Introduction

Do you know what momentum traders are? They are usually the people that will do things that will affect the prices of stock market investment and other trade values.

In the betting exchange, they are people who will make trades and bets that will make the other horses drift in price. The way they do it is that they will look at all of the different horses that are going to race in a particular day.

They will also look at the other conditions that have the potential to alter the race somewhat like the actual course, the terrain, and the weather. They will then back or lay trades with the intent to influence the prices so that people will make trades themselves to somehow “equalize” everything.

They Use Market Information

What is known as Market Information is actually some insider information- info that is only being passed around to a chosen few.

That is why they are able to influence the prices of the horses and they are pretty common.

But you also have to know that it is not all the time that there are momentum traders. You see, the market has evolved so much that the prices of the horses reach equilibrium long before they are influenced by such traders.

In most cases nowadays, they will only be present once there is a huge disparity among the prices. Many normal traders are doing their best to make sure that the market goes to equilibrium by themselves, without the influence of momentum traders.

They either drip-feed or they either wait it out. They just do not want a special group of traders to influence the prices because it would mean that they might have to pay a larger fee in the process.

Technical Trading

There are people known as technical traders and they are the ones who are very keen on examining different performance metrics so that they can bet accordingly.

In most cases, people are using some element of technical trading by themselves. That is largely thanks to the use of specialist software that even a novice can make use of such tools with relative ease.

That being said and with as many traders out there with their own styles, do penny-size traders stand a chance? Well, to be honest, yes. No matter what your play style is, there will always be a chance that you will win.

That is because the late money that is coming in; a period where the race is nearing its completion, is the most important thing.

Once you’ve made the necessary changes if things do not go your way, then you either lose only a small portion of your capital or you win.

Conclusion

Momentum traders can somehow influence the market, especially if there is a huge disparity in the prices of different horses.

However, they do not operate in nearly every trade; they will only do so if the market doesn’t reach equilibrium.

This is a good news for other opinionated traders because they can invest their money without having to worry about a special group of traders.

Published by

Related Posts