Push the Elephant: Exploiting and Testing Persistent Buyers

Summary

This article describes a high-frequency trading tactic that tries to profit from a large buyer who repeatedly raises a displayed bid. The trader first moves the market up by a tick, watches whether the buyer follows, and continues stepping prices higher if the bid keeps rising. The proposed exit is to sell accumulated inventory to the buyer at the elevated price, earning the spread between the initial and later prices.

The account also explains a key risk: a large institution may imitate a persistent buyer to draw the trader into raising prices, then sell into the trader's inventory. As a check, the trader can sell a small amount to the apparent buyer and watch whether its bid remains or disappears. The article offers an illustrative order-book scenario, not measured performance or a complete execution plan. It does not address fees, market impact, queue position, or the legal and venue-specific implications of manipulating prices, so the tactic's practical viability cannot be inferred from the example.

Key ideas

• The tactic infers persistent buying interest when a large displayed bid follows successive price increases.
• A trader may accumulate inventory while nudging prices upward and sell it to the apparent buyer.
• An institution could feign persistent demand to induce the trader to accumulate inventory at rising prices.
• Testing the buyer with a small sale may reveal whether its displayed demand is genuine.
• The description is illustrative and provides no performance evidence or full risk analysis.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.