A clue to how prices are fixed

Have you ever wondered how the last prices in post-market can differ widely with first prices in pre-market?

Take a guess.

Well, if you haven't heard of OTC trading, it's an exclusive privilege to VIPs/corporates/larger financial institutions.

Their lowest trading size range from USD 5 mil to 20 mil in a single order.

And these off-the-chart transactions are only visible when the exchanges "market maker", breakdown those orders into small batches or larger batches, depending on how much they want to influence the prices or if there are any conflicting positions.

There are also those OTC transactions that happens via API, usually by a trading firm where trading is augmented by an algo. As much as algos try to follow a strategy, you can spot some erratic behaviours to see where they are guiding the prices to certain levels.

So how can you profit from this? The favourite approach for most people is hodling. It is good and bad, depending on your investing/trading time horizon. Always discount TPs by 2 to 12%, because you never know who else beat you to it behind the scenes on with OTC trading.

Unfortunately, this is always, where the interest of retail and institutional trading divides.

It's hard to call it manipulation upfront although its effect influences price level and liquidity.... So be careful when you look at price signals, in reality there will be questions you need to ask yourself, is this signal a mix between market movements and institutional trading or purely one with little institutional interest.