|Martha Stokes, C.M.T. is the co-founder and CEO of TechniTrader®, an
educational firm dedicated to helping small investors and retail traders since 1998.
"Buy Side versus Sell Side Institutions"
by Martha Stokes CMT
There are two major groups of institutions and each has totally different roles in the financial markets.
The “Buy Side” and everyone in the professional world calls them that, are the Mutual Funds, Pension Funds, both the giants like Vanguard and California Teachers Retirement, and the tiny funds, that manage small business pension plans. This group also includes your local franchised neighborhood Financial Planner such as Edward Jones, and most non-profit organizations that invest in the stock market. It may include some municipalities as well. This group is strictly companies, investment firms, and individuals who are investing long term or short term on behalf of their fund holders, pensioners, or pension fund holders. They are not buying or selling for their own trading floor or investment firm. They make their income from the fees they charge for their services to their fund holders.
The "Sell Side" Institutions are the market makers, investment banks, broker/dealers, EFT, ETN, and ETP Issuers. Most sell side institutions with the exception of the Issuers, are large to giant corporations. These companies create trading and investing products or instruments that they sell to the buy side. They create Hedge Funds, Bond Funds, ETFs, Index Funds, and many types of Derivatives. They also can sell stocks directly to the Buy Side Funds. They are creating and selling financial services products. They make their money from the sale of their products OR from their proprietary trading floors. So they can make far more money than the Buy Side, because they have many ways to make profits from their instruments and from trading short term for their company. The Sell Side Institutions include State Street, Barclays, PowerShare, IShare, Bank of America, and Goldman Sachs.
Each type of Institution both the Buy Side and the Sell Side, have specific purposes in the market. Most of the time when you hear the term “Wall Street” it is the retail side referring the Sell Side Institutions, and not the Buy Side Institutions.
"5 Essential Candlestick Patterns"
Candlesticks are the best charting price plot style for most trading styles, and are easy to read to interpret price action properly. Not interpreting price action correctly is what leads to whipsaw Swing and Day trades, and weak stock runs.
Often times this area of study is a challenge for people who have not sufficiently developed their Spatial Pattern Recognition Skills, a critical skill set for technical traders.
There are NEW Candlestick Patterns that are now shown in the published Japanese Candlestick Text Books written, as well as internet articles. This is due to the fact that the original work in translating the Japanese Candlesticks from Japan, was done exactly as the Japanese had developed them for the Rice Commodities Markets of the 1600’s.
That was a very different Market than the 21st century Stock Market we have today. The 5 Essential Candlestick Patterns that develop in an automated market place are very different.
New candlestick patterns are present in all charts these days, while some of the older candlesticks taught in the older books are not as common now. A few candlestick patterns are brand new due to new professional side entry orders, the professionals can use and do use.
There are numerous new candlestick patterns to learn, which are both individual candlesticks as well as groups of candlesticks.
There are 5 Essential Market Participant Groups with 5 Essential Candlestick Patterns, each that are distinctly and uniquely specific to each major group. The Market Participant Groups causing these 5 Essential Candlestick Patterns are:
- The Dark Pools
- High Frequency Traders
- Smaller Funds
- Professional and Floor Traders
- Retail Traders, Small Lot Investors, and Uninformed Traders
By understanding the Candlestick Patterns these big groups create on the chart, you will know which dominates at that time.
Over the next few weeks we will discuss each group, the footprints they leave on the stock charts and why. These candlestick patterns form not only in individual stock and Exchange Traded Fund ETF charts, but also in Index charts.
Whether you want to trade Stocks, Stock Options, Exchange Traded Funds, or Indexes learning Spatial Pattern Recognition Skills and the different Essential Candlestick Patterns for each major Market Participant Group, will help you find better entries, setups for better exits, and overall higher profits.
When you look at a chart like COMPQX above, you should immediately be able to recognize each Market Participant Group’s distinct footprint. See how many you can identify. All 5 Essential Candlestick Patterns are present in this chart example.
If you are unable to immediately pick out which Market Participant Group controls price in this chart, then you need to improve your Spatial Pattern Recognition Skills to learn the new 5 Essential Candlestick Patterns.
Martha Stokes, CMT and CEO of TechniTrader®
TechniTrader® "The Gold Standard in Stock Market Education™"
Member of Market Technicians Association
CMT Chartered Market Technician
Master Rated Technical Analyst for Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
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