Who is counterparty

They're usually watchful and they're patient enough to wait for a perfect point of entry and exit in the market. Subsequently, one could say that they're the largest groups that determines market risks. In some conditions, liquidity traders and Market Makers can become technical traders, although not in the same way as retail traders.

A market maker can make a false move in the market knowing fully well that a large amount of technical traders will fall victim to this deceit, thus churning large amounts of shares. Momentum traders usually called scalpers are the fastest and most complex category of traders.

They're intraday traders who can study charts for several days with the intention of trading it for just one day. Dominantly, they're always on a lookout for quick movements that'll allow them jump in on take sharp profits within seconds or minutes. These traders make use of technical indicators as well as news events, volume spikes and price patterns. Some momentum traders are capable of placing up to hundreds of trades per day, and they'll only looking for small movements in their desired direction to exit the trade.

Momentum traders are mostly disciplined, have perfect knowledge of risk and money management, and have perfect knowledge of entry and exit strategies. This is the risk or the probability of the counterparty not being able to stand by their obligations. Nevertheless, the counterparties are not known, and the risk involved is handled via the help of clearinghouses and firms in some financial transactions. As a matter of fact, nobody knows who their counterparty is in most of the trades in a typical exchange trading.

More often than not, there will be multiple counterparties who end up being a part of the trade. Products IT. About us Help Center. Log In Where do you want to login? Sign Up. Income Tax Filing. Love words? Need even more definitions? Just between us: it's complicated. Ask the Editors 'Everyday' vs.

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