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You asked:
Or are the runner's
few contracts enough to *change* that equilibrium??) How does the
runner keep the market moving to his desired target -- do the rest of
the floor traders smell blood too, and help him move it?
Locals do to some extent work together and follow the leader like sheep, as
you suggest. Due to the close quarters, etc. locals have to live with one
another day by day (elbow to armpit) and "picking off a local" is frowned
upon to say the least. So if a local is trying to bid up the market, he can
usually do so until some paper orders are encountered (this 'price
discovery is essential to the functioning of the market by the way, but
that's I suppose another subject). He/she then can buy the offers and drive
the market higher in hopes of getting to some stops, whereby he can exit,
and usually exit with a profit (if there are enough stops or new orders
enticed to buy, he can exit all quite profitably).
In the mid 80's a new contract, the S$P 100, was started on the Merc and
wasn't yet very liquid, with mostly newbie type trader like myself who
generally watched, and traded one lots. A boisterous local bagan bidding up
the market , and finally yelled a bid for 500 contracts at an area near
where we all suspected stops would be located. A broker for a large
institution was lying in wait, and responded with a firm SOLD!
The look of panic on the local's face remains with me to this day...
Michael
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