I know a ton of secrets some are “legal but shady” and some are “totally illegal but impossible to trace”. I’ll also share a bit interesting secret facts about traders.

legal but shady.

I knew of a trader(buy side) who worked at a small hedge fund and he would trade stocks with the objective of a small profit however he trades volumes of stock at the highest legal commission rate that a broker can charge a client. The traders intent is to spend high commissions to dump cash into the stock brokers pocket(sell side). His trading strategy would be low risk such as pairs trading

The broker in turn will allow the trader to buy oversubscribed IPO - “An oversubscribed security offering often occurs when the interest for an initial public offering (IPO) of securities exceeds the total number of shares issued by the underlying company” and will almost always go up. The trader will sell the shares as soon as it goes public in the open market with a profit. The trader I knew made a million a year for the hedge fund, not a lot but easy money and under the radar and won’t get flagged.

“totally illegal but impossible to trace”

This happened a lot in the 80’s in Japan. Stock brokers would partner with real estate development firms and trade information. Here is an example: A real estate developer would give information on where the company is planning to develop to a stock broker who buys up land in that area. The stock broker in turn would give the real estate developer oversubscribed IPO stock for purchase.

interesting secret facts about traders.

I had access to traders who look at signal processing. Most of them were quant traders. As a headhunter I supplied programmers, quant anlayst, and a few traders. In this space most traders trade based off of what they learned in Academia, often times a PhD. I will always looks at the traders PhD abstract to get an idea of what type of trading that they might be doing and what type of support personnel they might be looking for.

For example I met a trader who I referred to Millenium Partners. He was a PhD in Psychology. What he did is model the behavior of the top 20 traders in the world. What we know about smart people is that they are habitual. He has been studying this a very long time and had enormous amount of data. His conclusion is that traders are most habitual when they are getting out of a trade to cut their losses. He would study this behavior, modelling it using computers. The computer would quietly crunch the data and fire off trades to profit from the traders losses when they are exiting their trade. He modeled the top traders because they can move the market with the volume that they trade.