Penny Scalping/Liquidity/Rebate Traders - What Now?

M

Marc to Market

Seems like all the stocks that were ripe for this style of trading have either went bankrupt, been delisted, performed reverse splits, or even rarely, got too expensive to flip. This would be your ERICY, WCOM, ADSX, SIRI, etc. The only real one that's left is ICGE and tomorrow marks the day that the shareholders are expected to vote in favor of a reverse split. After ICGE reverse splits like everyone's anticipating, I don't know of any other stocks on the horizon. What will the liquidity traders do now? Will they leech onto new stocks and try to make them work? Your thoughts?

Marc
 
I'm also questioning what these traders will do now Marc To Market. I'm new to trading and the "technique, approach, or style of "trading" " that they use is exactly this. High volume, low cost
stocks of which there are few or none left. My first thought was skepticism, pessimism, and now after seeing the techniques in action myself, I'm outright mystified. I don't believe this approach
works anymore. I've been trading this "style", and I say this in quotations because it's hardly a style or technique that I think can evolve in todays markets. It was a technique that the firm I'm at says should and can work, and they point out that several traders within the firm are making big money doing this.

They hesitate to call it credit trading. They say they don't trade for credits. If they don't why are they so concerned about getting rebates from the ECN's. So I discovered right away that the kind of liquidity out there in the marketplace based on what I saw today, ORCL, CSCO, and SIRI as examples in the afternoon, that I could not possibly getting filled and be on the right side of the market. They want to minimize loss, so that no gain is possible. Thus the logic here is that you can offer out or bid in if your short, and make money on the rebate.

There are alot of very smart people being taught this technique and I can honestly say that of the 50 or so trades I completed today, I was either in the hole or unprofitable. So effectively I'm attempting to rebate trade with no success. This is a business model at this firm and I'm looking for either a way to get FILLED, and there is no bounce that is significant enough to justify entering a position other than to attempt to credit trade. And you won't get FILLED alot of times regardless of the position be it short, long, and you wont be able to get out of that position in the alotted time to be profitable. I spent my time sitting around watching the Level II waiting to get filled. What do I do, Shave and try to get to the head of the line in a trade that is going against me regardless?

Having heard all the supposed money being made by traders proficient at not just rebate trading, but even trading and getting in and out of these micro-trades to ride some sort of momentum, I have to say I am still clueless after a week of thinking about it and only a few hours behind a level II. If there is truly some tangible, verifiable and copiable technique, I'd love to hear about it.

It's not even that I have a problem with this style of trading, It's that I don't know how, I don't see how, and no one has told me how. They simply say "It's Possible". So my guess is that 5 years ago when volatility was huge in these stocks, that I could get FILLED and profit on the rebate and on momentum. I see neither opportunities now.

My thought is that I'll take up trend following and enter markets where trend following is viable. I would really like to be a good trader, and good at the latter type of trading if it's feasible, I just havent seen proof that it works.

Can anyone show us? And show us HOW at that? Starting with how to get FILLED on entry and exit seems to be a good starting point.
 
I don't know a freakin thing about what the rebate guys are actually doing, but consider this.

If it was easy and obvious, then it couldn't work for anyone, cause who would you be frontrunning? There must be some subtlety that you're missing.
 
Sounds strangely familiar to a company called swift trade.

The funniest part about all the managers that try to teach this style, is that they really can't do it themselves. They are teaching something that worked two years ago. Once profitable, has now been manipulated to the point where it is so competitive it has become impossible.

I used to rebate trade when it was easy. It got hard, so I stopped doing it.

My best advice to anyone trying to figure these stocks out is that it really is next to impossible unless you are comfortable holding huge positions. Say this to yourself "how would I possibly get out of 500 000 shares of SIRI" That way you would be getting scared at the right time.

You would be saying to yourself "holy shit I've been offering everytime the futures go up and when things look great for the long and I still can't get out of my position, Maybe I should smack the bid and offer lower to get out of this."

Or alternatively " Everytime my offer hits the screen it gets filled instantly but the level doesn't go up, maybe I'll wait and see what happens"

This is the essence of "FEEL" in these types of stock, but if you're position is not large enough you won't get that same sense of "FEEL". Therefore you won't have any idea when you get spun, or why things changed on you.

Make any sense? Probably not. Oh well. I tried.

Final advice ----> Get out of a prop firm that pushes rebate trading. There used to be an inefficiency there but that has been exploited and is now gone. The prop firm looks at you as someone who churns (pays commission, but doesn't make any money for themselves) Oh well. At least you keep paying your commission. maybe like 0.25 cents a ticket. It adds up for these firms. But where does that leave you. You still can't make a paycheck. You may have a lucky month when you're stock is in play but you aren't consistent anyways, so in the long run you're still screwed.

The funniest part is that Traders who are bred in these rebate firms don't imagine that there are other ways to make money in the market. It's like teaching a baby a language that nobody uses anymore.

good luck
 
Quote from GSCO:

Sounds strangely familiar to a company called swift trade.

The funniest part about all the managers that try to teach this style, is that they really can't do it themselves. They are teaching something that worked two years ago. Once profitable, has now been manipulated to the point where it is so competitive it has become impossible.

I used to rebate trade when it was easy. It got hard, so I stopped doing it.

My best advice to anyone trying to figure these stocks out is that it really is next to impossible unless you are comfortable holding huge positions. Say this to yourself "how would I possibly get out of 500 000 shares of SIRI" That way you would be getting scared at the right time.

You would be saying to yourself "holy shit I've been offering everytime the futures go up and when things look great for the long and I still can't get out of my position, Maybe I should smack the bid and offer lower to get out of this."

Or alternatively " Everytime my offer hits the screen it gets filled instantly but the level doesn't go up, maybe I'll wait and see what happens"

This is the essence of "FEEL" in these types of stock, but if you're position is not large enough you won't get that same sense of "FEEL". Therefore you won't have any idea when you get spun, or why things changed on you.

Make any sense? Probably not. Oh well. I tried.

Final advice ----> Get out of a prop firm that pushes rebate trading. There used to be an inefficiency there but that has been exploited and is now gone. The prop firm looks at you as someone who churns (pays commission, but doesn't make any money for themselves) Oh well. At least you keep paying your commission. maybe like 0.25 cents a ticket. It adds up for these firms. But where does that leave you. You still can't make a paycheck. You may have a lucky month when you're stock is in play but you aren't consistent anyways, so in the long run you're still screwed.

The funniest part is that Traders who are bred in these rebate firms don't imagine that there are other ways to make money in the market. It's like teaching a baby a language that nobody uses anymore.

good luck
More...

Thanks,

Yes my post was basically for reporting back my experience. I have read people post the exact same thing as GSCO ( your right :). I've been skeptical from the start about this type of "trading". I've read about the subtleties of this type of trading. And exactly, it's high stakes poker, not trading. I can't get in or out of a position unless I can bluff my way out or in. And the Market itself is just to powerful to do that. And the stops they've set and the limited timeframe to operate in with the # of trades per day makes it absurd. If you can trade this style, you can probably make someone like a real prop firm that follows any style (less risk, less turnover, less b.s in general) a ton of money because you can get them in and out of the Market so quickly. It's a shame that these people don't go look for other ways to Trade or other firms to trade with. I'll have to take my own show on the road.
 
Mr. Success,

I thank you for your most godly reply. That is why as of 10.23 am EST I went flat at Swifttrade and said to the other trainees ( all of whom were not profitable ) in the room that I can't make money trading like this, congratulations if you can, and left the building. I will be a successful trader, but I most definitely will not trade in any way shape likeness or form to what Swifttrade proposes their "prop" traders do.

I wish you good luck with your life in trading and hope you cut out coupons from the newspaper, you'll need them.

Best Regards,

Eric Paradis
 
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