adding liquidity
- Thread starter marcD
- Start date
Alright,
You guys are making this far too complicated, something which is very very simple!!!! I have rebate traded before, and it is a very simple process.
Some of you are mixing up your vocabulary.....ECN fees, passthroughs, retail fees all mean the same thing. Rebates, negative passthroughs also mean the same thing (the opposite of the former).
WHen you bid or offer you ADD liquidity, some of you may have difficulty understanding this, but that is just the way it works. Imagine someone hit every offer up for 2 price levels. THen imagine no other offers were put in their place, and no new bids were placed either. This, technically, would decrease the liquidity of the stock by decreasing the shares in the book, and widening the spread. Dont argue this, its just how it works.
The fees for retail are more than the rebates you get for a filled bid or offer. This is how the ECNs make money.
To rebate trade you simply do this.....imagine you are trading worldcom (WCOEQ) for credits. It is .116 by .117 on Inca and ISLD. Yor default is, say 40,000 shares. You put a bid on Inca and abid on ISld at .116. You get filled on both, and have earned Inca credits of 2x40 (at 2 dollars per thousand) = 80 bucks. On ISLD you earned 1.1x40 = 44 bucks. Now you are long 80,000 shares. Offer out on both ISLD and INCA....repeat bidding process. If the bid went down to say .115x.116 then you may get out even, sometimes you can get out positive if the spread doesnt move and is filling on the offer. If you figure you got filled on ISLD and INCA in and out, then you would have earned $168 in and out on that trade. So if you took two tenths hit because you got filled onthe way down, then offered out, then you would have made only eight dollars on the trade *as each tenth with 80,000 shares is eighty dollars.
In other stocks that are more normal than this one, its harder...obviously they move a lot more. But try to at least bid or offer out after a big move so you dont pay retail both ways.
You guys are making this far too complicated, something which is very very simple!!!! I have rebate traded before, and it is a very simple process.
Some of you are mixing up your vocabulary.....ECN fees, passthroughs, retail fees all mean the same thing. Rebates, negative passthroughs also mean the same thing (the opposite of the former).
WHen you bid or offer you ADD liquidity, some of you may have difficulty understanding this, but that is just the way it works. Imagine someone hit every offer up for 2 price levels. THen imagine no other offers were put in their place, and no new bids were placed either. This, technically, would decrease the liquidity of the stock by decreasing the shares in the book, and widening the spread. Dont argue this, its just how it works.
The fees for retail are more than the rebates you get for a filled bid or offer. This is how the ECNs make money.
To rebate trade you simply do this.....imagine you are trading worldcom (WCOEQ) for credits. It is .116 by .117 on Inca and ISLD. Yor default is, say 40,000 shares. You put a bid on Inca and abid on ISld at .116. You get filled on both, and have earned Inca credits of 2x40 (at 2 dollars per thousand) = 80 bucks. On ISLD you earned 1.1x40 = 44 bucks. Now you are long 80,000 shares. Offer out on both ISLD and INCA....repeat bidding process. If the bid went down to say .115x.116 then you may get out even, sometimes you can get out positive if the spread doesnt move and is filling on the offer. If you figure you got filled on ISLD and INCA in and out, then you would have earned $168 in and out on that trade. So if you took two tenths hit because you got filled onthe way down, then offered out, then you would have made only eight dollars on the trade *as each tenth with 80,000 shares is eighty dollars.
In other stocks that are more normal than this one, its harder...obviously they move a lot more. But try to at least bid or offer out after a big move so you dont pay retail both ways.
My apologies....
the revenue from the 1st leg of the trade - the bid being filled would be 124, and the second 124, totalling 248 meaning you could take 3 tenths before you lost money onthe trade.
the revenue from the 1st leg of the trade - the bid being filled would be 124, and the second 124, totalling 248 meaning you could take 3 tenths before you lost money onthe trade.
No, you got it wrong. There is a firm that doesn't charge its traders any commissions but pays them 30%. They usually trade
500.000 + shares a day and make somewhat between $10.000 and $100.000 a month (before they get their 30%). It's not a real trading but it pays their bills. They traded Wcom now Ericy. Hope that helps.
Daqtrader, you have it completely backwards. The term "adding" means adding shares to the market for others to trade with. Good firms will pay their traders to add liquidity on isld, inca and even arca.
I have also heard through the grapevine that some nextrade traders are doing well considering that they are taking really no personal risk and just flipping. Not a bad way to go.
I don't know what you are refering to as my being "wrong". What did I say or ask that was "wrong"? I thought I said these guys worked for he ecn's and were getting paid to add liquidity. How is that different from what you are saying? By the way, if someone trades 500,ooo shares per day, how can that possibly add up to 10k-100k per month gross? Is every single trade successful? Remember, if they have to get out and DO NOT add liquidity, even if they break even p&l on the trade, they will lose perhaps 3 times as much paying to get out compared to the credit they earned to get in. Additionally, they will have to absorb some losses if the trade goes against them. They take 100% of the losses (p&l) and according to you, 30% of the gains (I think it is more, but not 100%).
I would like to think it is easy. I am getting several phone calls a day from 2 firms asking me to come "make markets" for them this way. But I just don't see the numbers adding up. I hope I am wrong. I would love to have no risk and get paid 100K per month to put out passive orders.
Thanks for any clarification,
RS7
It's different, because they don't work for ECNs. It's a propshop
This is how it works. These guys who make 10.000 to 100.000 for the firm are robots. They're very patient. All they do is bid and offer. Stocks goes down a penny - they buy mor on the bid. It goes lower - they buy more. Sometimes they hold up to 100.000 shares of a slow moving, liquid and cheap stocks. They use all possible ECNs and LSPD. They always shave a penny. They are happy to break even or even get out with a small loss - their credits exeed their losses. They don't pay comissions - only ECN, Soes (which are credits in their case) and SEC fees.
Of course - the majority of them make 5 - 15K a month before they get paid. Outstanding traders are rare but sometimes they make those 70-100K
It's not easy - it's extremly boring. If you can handle the bore - you may try it. And again - 100K profit is very rare. Most of the traders (I'd say 95%) make 5-15K and get 30% of it. If they don't make 5K a month they get nothing.
Hope that helps.
This type of trading is very simple, yet can be dangerous in certain situations. I strictly trade like this with rebates, but I also try and take money from the market. 5 Million shares a day can add up to a lot of rebates my friends. 15 Million shares in one day is the record over here. Most of us average 5 a day.