How does Goldman Sachs make money from trading?

I just read that their trading department made money by trading every single day in the first quarter and all except for 3 days in the second quarter. How do they make money trading? By jumping on trends early, by using program trading to take advantage of late-breaking news, or possibly by out-dueling the competing firms? How does the small investor stand a chance in the stock market? By recognizing when the big boys are moving in and out and by ignoring the whipsaws in the market?

Public Comments

1. Professional traders, which includes Goldman, make money in the market by knowing what they are doing.
They can buy and/or short in quantity, the stay on top of the markets they are trading in, and they have full understanding of the products they trade.

No, Professional do not need "late breaking" news, since by the time the news breaks, wall street already knows about it.

There's no "out dueling" competing firms, most professionals don't or would "duel with another firm, they work together more so.

The small investor should not be trading (they don't know what they are doing).
and if they are smart they will follow the pros's in the market rather than try to "out smart" them. They say, you follow the trend, but the small investor should also follow the big boys.

The pros's trade not only the equities, but they will hedge and/or trade there positions against options.

Professional traders don't worry about making money, since they know they will make money, but not every trade they do has to make money. Professionals also know that it's not about making money all the time, but rather protecting what they or at the least, minimizing any loosing positions they get into.

2. Goldman Sachs does not "jump on trends", they create them. Their traders are ruthless, and really good at what they do. They have the power to do as they wish. It is impossible to know when they jump in and out, because they are very good at hiding what they do. Your only chance is to invest in companies that the big boys won't touch, to recognize trends that are determined more by market forces and less by manipulation.