Market Tactics
Sophisticated market participants can use a variety of tools, tactics, and advantages to profit by achieving short-term or long-term market outcomes
Summary
- Short selling, derivatives, leverage – profiting from price declines via short positions, options, swaps, and other leveraged instruments
- Influence over market narrative – shaping sentiment through media connections, funded research reports, analyst ratings, or social channels
- Access to alternative trading venues – using dark pools, crossing networks, and other ATSs to trade without moving the visible market
- Extended-hours trading – acting on information before or after regular market sessions when liquidity is thin
- Complex ETF/Index strategies – moving baskets of securities to indirectly affect specific stocks
- Information edge – faster or earlier access to news, order flow data, or research
- Algorithmic & high-frequency trading – exploiting microsecond opportunities and order-book imbalances
- Large capital base – capacity to absorb risk, scale trades, and influence prices through volume
- Order book spoofing / layering – placing and canceling large orders to create false impressions of demand or supply (illegal if intentional, but still seen in some markets)
- Quote stuffing – flooding the market with rapid-fire orders to slow competitors’ systems and obscure real trading intentions
- Wash trading / matched orders – buying and selling the same security to create artificial volume or price levels (banned, but harder to detect in some OTC or crypto markets)
- Marking the close – strategically trading near the day’s end to influence the official closing price (which can affect benchmarks and derivatives payouts)
- “Painting the tape” – small trades at progressively higher or lower prices to create a misleading price trend
- Market maker exemptions – designated market makers can short without an uptick, have capital requirement relief, and access order flow information
- Reg SHO exemptions – certain bona fide market-making activities are exempt from locate/borrow rules that apply to regular short sellers
- Block trade privileges – institutions can privately negotiate large trades off-exchange, avoiding visible market impact.
- Foreign jurisdiction routing – executing trades via overseas entities to skirt certain domestic restrictions or reporting timelines
- Regulatory arbitrage – structuring products (e.g., total return swaps) to gain synthetic exposure without triggering ownership disclosure or position limits
- Special liquidity provisions – some funds or dealers have standing agreements with exchanges or regulators to provide liquidity in ways ordinary traders can’t
- Exemptions from position limits – certain hedging or bona fide trading activities are exempt from speculative position limits in commodities and derivatives
