experienced trader please help

P

pravda

ok i am trained in economics, and wondering if it applies to the nasdaq level II. My reason is that i own a stock that has 800 bids mostly sets of 5000, and yet only 200 asks mostly sets of 2500. In my economic experience that says to me there is far higher demand than their is supply, and the price should go up or show strength. yet the price of the stock fell dramatically. Does the amount off Bid to ask ratio actually mean anything at all?? As the difference in 800 bids to 200 asks is rather severe, is it likely then to start going back up?? I need to know for future trading knowledge, hope you can help, thankyou :-)
 
long term Economics of supply and demand will move an equity where it should go. Short term means very little, it is very possible for market makers to post false bids, and move stocks in the opposite direction for small time periods. Usually it pays to watch the time and sales more than a level 2 screen. Did 5000 actually trade? with only 200 on the other side> It can but it might not be enough to convice more buyers or sellers to join one big trader. All trade transactions are met with an equal # of buyers to sellers, remember that. I can't buy a stock unless someone sells it to me, nor can I sell a stock if nobody buys it. What moves the market is the conviction, do buyers want a stock more than sellers? If they do it will go up. If sellers are in pain and want to dump a stock with more conviction than a buyer has a stock will go down.

It's a tug of war

rtharp
 
I am not russian and have no idea what "ti je absolutne na hovno v tomto pripade " means, i think it starts like "you have absolutely no ......" what does "v tomto pripade" mean?
 
Sorry, I am not Russian either. It meant the education in economics doesn't do you (almost)any good in this business.There will probably be few who will argue that.
 
The other thing to remember about stock trading is that, unlike in regular economics and supply/demand theory, with a stock, short term demand that might exist could quickly disappear as a stock moves the wrong way. People who have bids in for the stock might pull them as they think the stock looks weak or their trade might be no good. Many times I have posted a bid for a stock only to cancel it when I saw that there was strong downside pressure. Unfortunately, these days Level II doesn't help much anymore in determining reliable stock direction, as rtharp mentioned how market makers use all sorts of tricks and deceptions to hide their intentions, and orders can quickly be cancelled.
 
There is another factor I forgot to mention. It is possible for that 2500 showing on the offer to really be 250,000 or 400,000 showing on the offer with a market maker setting an automatic refresh on his order. He has an order to sell 400,000 but if he showed his hand the market would tank. So he shows 2500 and when an order is bought from his offer it refreshes again and again till his entire order is filled. The market maker never showed his hand like an experienced poker player. If the inside bid /ask moves away he would just change his price.
This can mean Level 2 is useless to as it is impossible to really figure out what he has. What you can do as a trader if figure out who controls the stock. Which market maker and try to catch a ride with his trades.

rtharp
 
rtharp

Since MMs are "hiding" by using ECNs, isn't it even harder to really figure out how much control a particular MM has in a stock? Thus, Level 2 is even more useless.

BSAM
 
BSAM,

You're exactly correct. Especially in higly liquid stocks like JNPR it is nearly impossible to determine who's doing what. For example for the month of April, Goldman was the most active MM for JNPR (41 Mill Shares), but he wasn't noticably on the bid/offer any more than other MM's because he used ECN's most of the time.

Level II used to give clues that you could capitalize on, but now it is to be used only as an execution tool most of the time.
 
if anybody is in the mood please help me with these questions.

first everything i read and hear says once a trade is prfitable don't allow yourself to take a loss. well i find my self constantly taking profits of pennies per share because i get a small move and then it backs off. i have a mental stop (IB stops don't work) that i hit at 50% of profit. so i buy. it goes up .10. backs off to .05 and i sell. of course if it continues to rise i move my stop up.
but i look at my spreadsheet of trades and there are a bunch of these small profit trades. should i stick in there longer i.e let it go negative or get out and then back in.


do the better (more expensive) data feeds tell you whether mm are net buyers or sellers.

on-on

gb
 
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