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The Top Three Wall Street Trading Strategies — And How Retail Traders Can Still Compete
What if an insider explained how trading really works on Wall Street?
Not the simplified stories about indicators or headlines—but the actual strategies used by professionals, hedge funds, and algorithmic desks to gain an edge in the markets. Understanding these methods doesn’t mean you can copy them directly, but it does allow you to follow the big money and trade with far more objectivity.
In this article, we break down the three most dominant strategies used on Wall Street today, drawing on insights from former Wall Street trader and scalper Serge Hoffman, and explain what retail traders can realistically learn—and use—from them.
How Trading on Wall Street Really Works Today
Modern markets are no longer driven by human reflexes. Speed, automation, and data dominate. Trades are executed in nanoseconds, powered by advanced algorithms and massive server infrastructure located as close as physically possible to exchange data centers.
Wall Street’s biggest advantage isn’t secret indicators—it’s technology and capital. Entire football fields of servers exist solely to shave milliseconds off execution times. Retail traders simply cannot compete at that level.
But that doesn’t mean retail traders are locked out.
What is possible is learning how to recognize the footprints of these strategies and position yourself accordingly.
Strategy #1: Market Making & High-Frequency Trading (HFT)
What It Is
Market making is the backbone of modern Wall Street trading. Algorithms constantly work both sides of the market—buying on the bid and selling on the ask—to provide liquidity and profit from tiny price differences.
Today, this is almost entirely handled by high-frequency trading (HFT) systems, executing thousands of trades per second. These algorithms manage order flow, absorb liquidity, and accelerate price movement when conditions are favorable.
Can Retail Traders Use This?
Not directly—but you can observe it.
By watching order books and price ladders, experienced traders can often spot:
When liquidity accelerates in one direction, price often follows quickly. Retail traders who recognize this can trade with the flow rather than against it.
The key insight:
Follow speed and liquidity, not opinions.
Strategy #2: Arbitrage
What It Is
Arbitrage exploits price discrepancies between different markets, exchanges, or routing paths. If an asset trades at slightly different prices in two places, algorithms buy low in one venue and sell high in another—often instantly.
This strategy is common in:
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Equities
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ETFs
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Crypto markets
Can Retail Traders Use This?
In traditional futures and equities, arbitrage is mostly algorithmic and inaccessible to retail traders due to speed limitations.
However, crypto markets still offer occasional arbitrage opportunities because:
Some professional crypto traders still specialize exclusively in arbitrage, and under the right conditions, retail traders can participate—though competition has increased significantly.
Strategy #3: Order Flow & Micro-Scalping
What It Is
This is one of the most active and misunderstood strategies on Wall Street today.
Order flow scalping focuses on:
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Rapid bid/ask interaction
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Short bursts of algorithmic activity
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Temporary inefficiencies caused by event-driven execution
Rather than predicting direction, traders observe real-time behavior in the order book—how aggressively orders are filled, pulled, or flipped.
Certain strategies (like “flipping”) were once manual but are now fully automated. Still, algorithms leave patterns, especially during:
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News-driven events
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Illiquid periods
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Sudden volatility spikes
How Retail Traders Can Use It
In specific moments—particularly in thinner markets like currency futures—algorithms may rapidly fill both bids and asks. When this happens, skilled traders can:
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Place alternating limit orders
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Capture small, repeated profits
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Trade both sides of the market briefly
These opportunities don’t appear every day—but when they do, they can be highly profitable if recognized in real time.
Why Charts Alone Aren’t Enough
Wall Street does not trade purely on technical indicators or chart patterns.
Charts are used primarily to understand what already happened, not to forecast the future mechanically. Price movement is driven by:
News doesn’t move markets.
Decisions made because of news move markets.
This distinction is critical for short-term traders.
The Biggest Myth Retail Traders Believe
Many traders assume institutions like BlackRock “move the market” simply because reports say they’re positioned long or short.
The reality:
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Institutional data is often delayed
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Reports describe what already happened
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Intraday price movement depends on current execution, not long-term positioning
Smart traders trade what they see, not what they’re told.
How Retail Traders Can Compete (Realistically)
Retail traders don’t win by being faster or smarter than algorithms. They win by being:
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More selective
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More patient
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More objective
Successful traders combine:
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Subjective context (news, reports, expectations)
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Objective confirmation (order flow, liquidity, price behavior)
If liquidity isn’t present—don’t trade.
No liquidity, no opportunity.
The One Rule That Matters Most
At the end of the discussion, Serge Hoffman summed it up with one sentence:
“Read less. Observe more.”
The markets constantly reveal what’s happening—if you’re watching the right things.