I must start by saying you can never get it right 100% of the time, the market is changing constantly so what appeared to be a spoof amount suddenly isn't and vice versa. What is important is to stay calm about it because if the stress monkey on your shoulder starts chatting in your ear you are guaranteed to lose money! You know the stress monkey conversation by now, I still hear my monkey from time to time "That always happens" "Sod it just hold on and it will turn around"....I won't go on but you get my drift...forgive the pun!
This is how I approach the market and I know Peter thinks in a similar way. I have been sitting close to Peter when we are trading and one of us will say "have you seen the £xxxx at 2.50?" Assuming we are both active in the same market, chances are we have both seen it and we acknowledge one another. We are then preparing for our trade and will execute according to it being spoof or being smashed by an order. One evening we had a novice trader in the room, a researcher for Peter and I was trying to guide him in the market. I shouted to Peter to alert him of a potential spoof amount. He was working on a project but quickly switched to the market and instantly we were singing from the same hymn sheet. We both had some money matched at the best price but we also knew it would be time to jump in and grab money should this be spoof money. I advised the novice trader, let's call him Derek (not his name) about the potential for a good trade and explained my intentions. 20-30 seconds, Peter and I were giving a virtual high five as we had just pulled off the best trade of the day on an ordinary market at Lingfield. Derek was just entering as were exiting and he looked a bit miffed. His issue? He could not commit through fear of being wrong, I call it the "what if" millstone which a lot of traders have around their necks. The spoof amount had already convinced him it would push the market one way and when that didn't happen he wanted too much time to confirm it actually was a true move. By the time his stress monkey had stopped chattering it was too late. So why does that happen so often and I am sure some of you are saying "sh*t, that happens to me...in fact I could be Derek!" So let's try and put some common sense on it for anyone that is interested.
We must start with a few truths.
The market is never wrong
The market is better than me and you
Money is King in a simple market mechanism
Try not to get sucked in by the comments thrown around by experts on the TV who say "they got that wrong" or "that drifted like a barge and still won, boy did the market get that wrong!" The market is never wrong, it is a very basic mechanism and it only moves according to how the money enters...simples!! I bet someone is saying "if it is so simple then why can't I read it?" Let's try and demystify it for you.
A lot of traders fail and there are a plethora of reasons. Fear of getting it wrong cripples them and their hesitation results in losses. Some are belligerent and refuse to accept what is happening. Without getting all mumbo jumbo, once your brain is fixed on one outcome it will lose focus on all other outcomes and you will not actually see what is truly happening. Some think there is a silver bullet or magical indicator but trust me there isn't.
To spot spoof money you have to see what the market is actually doing. You don't need to know why, you just need to accept it's position. You must watch for a trend i.e. a steaming horse and then check which other horse or horses are not being supported. So let's assume a steaming favourite as this is generally the easiest to spot. First clear your thoughts, do not get crippled by a preconceived idea that it is "bound to reverse!" When a move starts, the momentum can be slow or inconsistent which is caused by indecision. If I push someone, they push me back, it's just human nature and the markets are the same. As someone offers up opposition to the move, someone takes that money. This is where we have to accept the market knows best and generally the layers are not stupid. I am not saying all backers are stupid but let's face it, betting horses doesn't pay for 99% of participants and the market is a simple reflection of that.
Spoof money can imapct in a couple of ways; there are probably more but I will cite two.
- You believe the large amount and jump in front. It disappears...d'oh!
- You hesitate too much or queue your order and when it does take off you miss the move...d'oh!
I have a meeting in ten minutes so I will break off for now. Please ask questions and I will try to cover them in a later update.
Sorry but I took longer than I expected to write this
JG