đ How do market makers and decision-makers choose their stocks .. the foundations, criteria, and tools.
Realistically and objectively, when we open the file âHow the big players think in the marketâ â whether they are market makers, hedge fund managers, bank trading rooms, or even institutional investors â we are not talking about randomness, nor superficial analyses as some may think, but about a huge complex machine of calculations and scenarios, risk assessments, potential returns, timing, objectives, and impact.
Anyone who thinks that a âmarket makerâ chooses a stock just because of its chart pattern, or a circulating rumor, or even a press statement, lives in an illusion far from the reality of the markets.
How do they think?
The process begins with two fundamental questions:
1. Where is the smart money headed?
2. What are the calculated risks versus expected returns?
None of the big players randomly enter a stock. Everything is calculated. The company is analyzed in terms of:
Expected future profitability, not past.
The competitive strength in the sector.
Cash flows and their ability to service debt or expand.
The nature of major shareholders, and the level of discipline and governance.
Timing of results, deals, and significant announcements.
For example, you find that they avoid companies that are under pressure from publicly announced legal issues, or those that suffer from severe fluctuations in their profits without a clear justification, even if they are technically attractive.
As for those who are still chasing rumors or are tempted by a candlestick pattern here or there, they will remain easy prey.