Adverse selection
Definition · Level 6 · Desk language
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The risk that whoever trades with you knows more than you do, so the trades you get are the ones that hurt; the tell is repeated one-way flow. A key reason market makers widen spreads before news.
Example
The client who lifts your offer right before a tape bomb.
Where Tradecraft teaches it
Level 6 · Desk language, in the lesson “Market microstructure”: Who is on the other side of your trade, where it happens and how it shows up on the tape.
Related terms
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