[sourcery]

I was not referring to mutual or hedge fund managers, who are usually wrong (just like the newsletter writers.) The correct designation of fund managers is "institutional traders." Also, mutual fund managers are generally required to invest most of the cash they receive in stocks or bonds. Although they have some discretion, it is limited. By "professional," I meant someone whose primary income is generated from market operations involving his own capital (by which I mean profits on trades, not receiving a salary or commission for acting as a trader using someone else's money.)

A commercial trader is someone who buys and/or sells an asset or derivative for commercial purposes, and not as a speculation or an investment. Commercial traders buy securities or derivatives (e.g, futures, options) in order to hedge their positions in some underlying asset (e.g., wheat, oil.) Examples of commercial traders: a wheat farmer who sells wheat futures in order to hedge the market value of his crop, an oil distribution company that buys oil futures in order to hedge the price they will have to pay for the oil they distribute.

In the stock market, a commercial trader would be someone who buys and sells stocks as a market maker, such as a stock broker or investment banker. The difference between this case and the other cases is that no one buys and sells stocks as a way to hedge against price changes in the market in which they do business. The closest one gets is those who buy and sell stock index futures. Anyone who does this in order to hedge stock positions held as a necessary part of the operation of their business would be considered a commercial trader of stock index futures. When someone talks about the net long or short position of commercial traders in the stock market, what they are actually referring to is the net positions of those traders in the stock index futures market.

[zechariah]

The correct designation of fund managers is "institutional traders."

I was under the (perhaps mistaken) impression that most money in the markets was handled (by your definition) institutionally. Were that the case, though, wouldn't that make them the "strong hands"? But you and arete are saying that the professional/commercial players are the strong hands.

So does that mean that the institutional players aren't as big as I was led to believe?

In the stock market, a commercial trader would be someone who buys and sells stocks as a market maker, such as a stock broker or investment banker.

Does being a market maker intrinsically gives you a strong hand? And how does one (like arete and yourself) find out what the strong hands hold?

And why haven't the mutual fund managers caught on?

[z]

[zechariah]

By "professional," I meant someone whose primary income is generated from market operations involving his own capital (by which I mean profits on trades, not receiving a salary or commission for acting as a trader using someone else's money.)

I thought market makers made money by pairing buyers and sellers where the the buyer pays a bit more than the seller sells for and the marker maker pockets the difference. How does that involve "his own capital"? Do market makers routinely accumulate stocks by buying more than they sell?

The difference between this case and the other cases is that no one buys and sells stocks as a way to hedge against price changes in the market in which they do business. The closest one gets is those who buy and sell stock index futures. Anyone who does this in order to hedge stock positions held as a necessary part of the operation of their business would be considered a commercial trader of stock index futures. When someone talks about the net long or short position of commercial traders in the stock market, what they are actually referring to is the net positions of those traders in the stock index futures market.

Ok, so what keeps the commerical traders from being wrong?

[z]