know who you are buying from

[silk]

My parents bought me a few trading books for christmas. I skimmed through hundreds of pages, and most of the info didn't seem very helpful. Howerver this stood out.

One book talked about knowing who you are trading with. When you are buying, someone is selling.

I thought about this some, and i came to the conclusion that the best trades are when you are buying from someone who is willing to sell only because you are willing to pay a nickel or dime higher than the last price. Because thats where the market "is". In the case of the NYSE, you are buying from the specialist because he is entitled to provide liquidity. If he is the lone seller, and he makes you payup for your stock, you probably have a winner. Another person who you want to buy from would be a small retail short seller who will later have to cover when he realizes he is wrong, pushing the stock further in your favor. Or you want to be buying from another trader who is just "taking profits". You want your buying to be putting short stock into weak hands!! These weak hands will put money in your pocket later in day when they have to cover.

People who you don't want to buy from are large sellers you have more size to go. When you buy from them, you are helping them out, and are putting long stock into your own weak hands!!

I could have written this better, but hopefully some of you can relate and comment on this.

 

[Gordon Gekko]

Quote from silk:

I could have written this better, but hopefully some of you can relate and comment on this.

i understand your point, dude

 

[freealways]

Now all we need to know is HOW do we know whom we are buying from.

So how does one go about that ?

Jack

 

[aphexcoil]

Quote from freealways:

Now all we need to know is HOW do we know whom we are buying from.

So how does one go about that ?

Jack

If someone is offering 100 shares, maybe you can buy it. If someone is offering 10% of the float, maybe he/she knows something you do not?

 

[rtharp]

Quote from silk:

My parents bought me a few trading books for christmas. I skimmed through hundreds of pages, and most of the info didn't seem very helpful. Howerver this stood out.

One book talked about knowing who you are trading with. When you are buying, someone is selling.

I thought about this some, and i came to the conclusion that the best trades are when you are buying from someone who is willing to sell only because you are willing to pay a nickel or dime higher than the last price. Because thats where the market "is". In the case of the NYSE, you are buying from the specialist because he is entitled to provide liquidity. If he is the lone seller, and he makes you payup for your stock, you probably have a winner. Another person who you want to buy from would be a small retail short seller who will later have to cover when he realizes he is wrong, pushing the stock further in your favor. Or you want to be buying from another trader who is just "taking profits". You want your buying to be putting short stock into weak hands!! These weak hands will put money in your pocket later in day when they have to cover.

People who you don't want to buy from are large sellers you have more size to go. When you buy from them, you are helping them out, and are putting long stock into your own weak hands!!

I could have written this better, but hopefully some of you can relate and comment on this.

That's actually a great thing you posted


When I want out of a trade and hit a hotkey to exit my position if I get an immeadiate fill at a good price........


oh crap this move isn't finished...

luckily I usually peel out of winning positions and still have more shares which I'll give more wiggle room.


If I get a late fill at a bad price........

the move is over.....time to step on the gas with my other shares /peel out more heavily.




Are you trading with the person in control? or against him?

your fills will often tell you

 

[Babak]

I just finished reading "Reminiscences..." for the nth time and this is exactly what Livermore did. He woud test the market by watching how is orders were absorbed (or not!).

It is amazing that things have not changed at all in the market.

 

[nitro]

Quote from Babak:

I just finished reading "Reminiscences..." for the nth time and this is exactly what Livermore did. He woud test the market by watching how is orders were absorbed (or not!).

It is amazing that things have not changed at all in the market.

However, if the stock is in the SP500 and is an actively traded stock, "how (fast) orders are abosrbed" has to be weighed in the context of what the spoos are doing, e.g., if all of a sudden the spoos turn hard, no one in there right mind would be standing toe to toe on the bid with the offer (in the case where the spoos turn down - this is also a slight simplification - the value of PREM/TICK/TIKI should likely come into play as well) _unless_ the stock was strong, and possibly not even then, as you are likely to get it a nickel or dime "cheaper." (In fact, the spread widens almost instantly in this case, and sending "probes" to see how fast sell orders get filled is likely to receive the wrong message in the very short term.)

In Livermore's time, there were no spoos, so this type of "tape reading" made more sense then.

Still, I agree there is nothing like seeing how your orders are/are not filling to get a feel for the supple/demand for a stock - IMHO, just have to take it in the "right" context.

nitro