The Prop Trader's Chronicles: Short-Term Proprietary Trading Strategies for Both Bull and Bear Markets

GOLDMAN SACHS SIGMA X

SIGMA X is one of the largest dark pool systems in the U.S. equity markets and is connected to a large network of Goldman Sachs' customers as well as external liquidity providers. It allows traders to provide as well as remove liquidity from the infrastructure of Goldman Sachs, one of the world's largest bulge bracket investment banks.

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From the standpoint of a smaller trader (small in comparison to a hedge fund or HFT operation transacting on the scale of hundreds of millions in capital and allocating a percentage of it to the market that you are currently trading), remember that bids and asks (limit orders resting at the market centers) can be canceled at any time, so it's also possible that many market participants do not actually hope to get the entire displayed size filled when placing these orders. They may also be hoping to get far more shares filled than the number displayed. It's essential to be aware of this because the Level 2 quote can often be manipulated at times to some degree, and can also be misleading since there is a wide variety of trading strategies that result in the total numbers shown. Not everyone is playing the same game, whether they are humans on keyboards or computer algorithms created by humans on keyboards at an earlier time. Also, many hedge funds and institutions tend to split their orders between different destinations to hide their real hand at any given time even if they use the public venues for their transaction. ...