Does anyone here strictly attempt to follow exactly what the specialist is doing? Basically, I am trying to enahnce my tape reading skills so as to attempt to understand what the spec is doing. Does anyone have any advice for me with regards to what to look for in terms of prints/size/etc. I know this is one of the hardest things to do in trading but I cannot find too much info on this subject. Anything you can tell me would be greatly appreciated. Thanks.
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Specialists
- Thread starter knowledgebone
- Start date
I think you should realize that the NYSE has several automated systems to execute orders that bypass the specialists. I believe they are DOT and SuperDot.
In addition, with all the ECNs, a lot of volume takes place away from the exchange.
Finally, you don't know the hedging activity of the specialist. He could be shorting a stock, he could be shorting stock against long calls and short puts. The list goes on and on.
It was one thing to watch the tape when the tape was the only game in town, now however, it is just one of the games, and it is only part of the one game it belongs to.
Howard
http://www.tapetactics.com
In addition, with all the ECNs, a lot of volume takes place away from the exchange.
Finally, you don't know the hedging activity of the specialist. He could be shorting a stock, he could be shorting stock against long calls and short puts. The list goes on and on.
It was one thing to watch the tape when the tape was the only game in town, now however, it is just one of the games, and it is only part of the one game it belongs to.
Howard
http://www.tapetactics.com
make sure you can get open book, learn about the nx,liquidity quote,study 1 specialist for a while and do searches for tape readingQuote from knowledgebone:
Does anyone here strictly attempt to follow exactly what the specialist is doing? Basically, I am trying to enahnce my tape reading skills so as to attempt to understand what the spec is doing. Does anyone have any advice for me with regards to what to look for in terms of prints/size/etc. I know this is one of the hardest things to do in trading but I cannot find too much info on this subject. Anything you can tell me would be greatly appreciated. Thanks.
Tape reading is an essential part of trading, and i'm glad there is a thread which is discussing it. WAY too much emphasis is put on technical analysis here i find.
Anyways, a few of my thoughts.... and they're just that, thoughts...
1) The specialist has complete control of a stock... what does that really mean? well, he can, without hesitation, change the price of a security at any given moment. it can be .50 X .52, and he can change it to .48 X .51 if he deems it appropriate, based on floor interest, his own positions, etc etc....
2) The important thing to watch is where the stock is trading related to the specialists quote. if it trades a the bid, it's going down, if it trades at the offer, it's going up... that's an obvious one. BUT, if he quotes a stock down or up, the next few prints with size (generally anything over 5000) usually give some indication of movement.
3) If a specialist quotes a stock down, ie, BBO is .42 X .44, and he changes the bid to .40, watch the NEXT quote, and the NEXT print. He will change the quote, and then see how interest changes.... if he quotes it down, and lots of buyers come in at .40, then he knows that he has determined the 'fair' bid for that time. If he quotes it down to .40 and very few buyers come in, then the interest to buy at .40 is small and he will, most likely, quote it down some more, until the buyers come in with size.
4) if a stock is quoted with a big spread at, say, .44 X .47, and the stock is traded at .46 consistently, then you can determine that the .44 bid is TOO LOW, and he will raise it.... well, a raised bid says something, doesn't it?????
5) Finally, most NYSE traders would agree that the REAL market is the Specialists market, and the ECNs and regionals don't mean a damn thing. They're great for executing against if they're near the specialists inside, but they generally don't move markets.
These are just some preliminary thoughts on tape reading NYSE stocks.... i'm new to it, and these are just my observations thus far.
Anyways, a few of my thoughts.... and they're just that, thoughts...
1) The specialist has complete control of a stock... what does that really mean? well, he can, without hesitation, change the price of a security at any given moment. it can be .50 X .52, and he can change it to .48 X .51 if he deems it appropriate, based on floor interest, his own positions, etc etc....
2) The important thing to watch is where the stock is trading related to the specialists quote. if it trades a the bid, it's going down, if it trades at the offer, it's going up... that's an obvious one. BUT, if he quotes a stock down or up, the next few prints with size (generally anything over 5000) usually give some indication of movement.
3) If a specialist quotes a stock down, ie, BBO is .42 X .44, and he changes the bid to .40, watch the NEXT quote, and the NEXT print. He will change the quote, and then see how interest changes.... if he quotes it down, and lots of buyers come in at .40, then he knows that he has determined the 'fair' bid for that time. If he quotes it down to .40 and very few buyers come in, then the interest to buy at .40 is small and he will, most likely, quote it down some more, until the buyers come in with size.
4) if a stock is quoted with a big spread at, say, .44 X .47, and the stock is traded at .46 consistently, then you can determine that the .44 bid is TOO LOW, and he will raise it.... well, a raised bid says something, doesn't it?????
5) Finally, most NYSE traders would agree that the REAL market is the Specialists market, and the ECNs and regionals don't mean a damn thing. They're great for executing against if they're near the specialists inside, but they generally don't move markets.
These are just some preliminary thoughts on tape reading NYSE stocks.... i'm new to it, and these are just my observations thus far.
thanks guys