making market

[jb514]

Any of you guys make market by hand on the larger spread equities? It seems like it could be profitable but I haven't really heard anyone talk about it.

 

[abattia]

I would just give it a go.

If you'll be market making by hand, you'll be well positioned to compete with these guys ...
http://en.wikipedia.org/wiki/High-frequency_trading

I would suggest you take just small steps to start with.

 

[jb514]

Yeah all the other orders are definitely automated. It kinda seems like they are just flipping from the bid to the offer not taking any inventory.

 

[JuniorCTA]

Quote from jb514:

Yeah all the other orders are definitely automated. It kinda seems like they are just flipping from the bid to the offer not taking any inventory.

ie day trading

 

[2rosy]

you're going to sit there all day manually making a market? you must put very little value in you're time

 

[jb514]

Quote from JuniorCTA:

ie day trading

inventory as in trading high volume but never taking on any significant amount of shares

 

[Rationalize]

Quote from jb514:

Yeah all the other orders are definitely automated. It kinda seems like they are just flipping from the bid to the offer not taking any inventory.

On a good day

 

[iggy9807]

If you do it manually, I recommend finding a few micro-caps that look "solid" to reduce the risk of a big loss. Basically, find something you wouldn't mind investing it and trade around your position without going short.

I trade about 500 low-volume stocks but I upload my limit orders overnight so I am not a "real" market maker. If you get stuck with a position in a thinly-traded stock, it's really hard to get out - the spreads can be as wide as 10-20% so be prepared for occasional big losses and limit your positions. Of course, the wide spreads is why it's "easy" to make decent profits (with a smallish account).

 

[jb514]

Almost everything I do is automated, so by no means am I set on trading by hand

 

[bone]

Be very, very careful with automation in thin names. And in the overnight and late afternoon markets. Most of the really painful automation errors that I have heard about locally here in Chicago typically are in thin, wide, gappy markets.