strategy read in a daytradingbook

[bora]

This is a strategy i read today in a daytradingbook, i don't know if it works...

Firts look who are the key players in a particular stock. Look at how many times which market makers have been at the inside bid and ask. If you see a key market maker reloading at the ask, then watch out. when the selling pressure subsides , the stock is likely to bounce back. Sometimes size sellers will pause and allow the stock to retrace. Without the pause, the seller will place too much continuous pressure on a stock and drive the price down. to avoid this, the MM wil let the action of market participants retrace the movement in the stock that was caused by the selling pressure. This is a great opportunity to make an eight or a quarter on the long side.

what do you guys think of this strategy??

 

[Sniper_Trader1]

Originally posted by bora

1. Firts look who are the key players in a particular stock.

2. Look at how many times which market makers have been at the inside bid and ask.

3. If you see a key market maker reloading at the ask, then watch out.

4. when the selling pressure subsides , the stock is likely to bounce back.

5. Sometimes size sellers will pause and allow the stock to retrace.

6. Without the pause, the seller will place too much continuous pressure on a stock and drive the price down. to avoid this, the MM wil let the action of market participants retrace the movement in the stock that was caused by the selling pressure.

This is a great opportunity to make an eight or a quarter on the long side.

what do you guys think of this strategy??

I will try to answer this one.

1. The key players hide behind the ECNs, so more often than not, you don't really know who the seller or buyer is.

2. This has nothing to do with them being net sellers or buyers

3. True, but too much room for margin of error

4. Yes, that's true too, but you can hardly ever get a fill once it bounces at a decent price. Especially if it was selling off hard.

5. Sometime is a key word here. And if you guessed it wrong, it could be a few points before you can get out of the trade. Major loss for trying to make 12-25 cents.

6 A. This is also true, but again you can lose too much.

6. B. Since you recognize there is a seller in the stock you are following, why try to get 12-25 cents on the rally? The strategy should be to short the bounce since the stock is facing selling pressure! Do you see the difference in the thinking here? Trying to go long on a stock that is selling off is counter trend.

Would you rather swim with the current or against it?

Bill