Trader Motivations Q

Which of the following trading tactics would most likely be used by an information-motivated trader?

A) Need-trustworthy-agent. B) Liquidity-at-any-cost. C) Costs-are-not-important.


They need to transact fast & anonymously



Ans is B, I fell exaclty like FTW

Almost did the same thing, but I looked at it again and ended up with B. These are the tricky ones that the CFAI will definitely try to pull! Don’t leave points on the table due to reading too quickly!


Liquidity-at-any-costs is less concerned about costs and more concerned with liquidity than a costs-are-not-important trading tactic. For an information motivated trader the most important issue is liquidity; if it’s not there he needs it created (which generally means a concession in price - which increases costs)

a costs-are-not-important tactic is also not worried about costs, but not so much as to move the price in the market to create the liquidity needed.

Liquidity-at-any-cost looks so close to “Liquidate-at-any-cost”…

Liquidate means create liquid asset . Liquidity at any cost opposite , absorb liquidity by providing cash, I.e one reduces risk while other seeks risk

liquidate - actually means to SELL.(as in I liquidated all my holdings … and most times at a big loss).

“liquidate - actually means to SELL”

And if you’re short? Then liquidation would amount to Buying the aseet .

The action reduces your position in either long or short case , and reduces risk by absorbing liquidity