Trading based purely off Nasdaq L2.

L2 is just a way to deceive the unititiated into thinking they can "read" something about something that is "unreadable"...and to think that some "schools" actually teach this junk just cracks me up.

Now the the NAZ is going to more "exchange style" trading with the Super Montage...it will be interesting what "wonders" these schools will teach now.

Oh well, since this is an easy game to keep score of....I doubt that we will have to worry much longer about newbies being taken advantage of.
 
I am also at a firm and office where most, if not all of the traders scalp off of the L2 box. It worked well until Dec where it has really dried up. Now it is really a struggle because of such choppy moves. It is becoming too hard to limit your risk while scalping out small profits. Besides that the small profits are becoming so small that it is not worth it anymore. I have been looking around at other strategies but would prefer to be in an environment where people successfully trade these other strategies rather than trying to be the only nonscalper in my office.

In the past I have traded M&A arb stuff and I am aware of pairs. I have been looking at basket sector trading and intraday position trading off of charts again. I would like to know what else is working out there and if there are any offices in the Southern Calif area that have a good group of traders who share ideas without having the trader egos.

The good thing about scalping is that I have pretty low commission rates because of volume and I trade on a fast reliable system. Unfortuantely what I have noticed at some other firms is that if most of the traders trade NY stocks and position trade then their systems are not up to pare as far as fast executions. I believe no matter how you trade -- your system and executions should be flawless because you never know when you are going to have breaking news. Besides you lose a lot of money if you are on a crappy system and miss stock by 3 to 5 cents over and over again. When you magnify that over a year it adds up.
 
Originally posted by Don Bright
L2 is just a way to deceive the unititiated into thinking they can "read" something about something that is "unreadable"...and to think that some "schools" actually teach this junk just cracks me up.

On the contrary Don, I think that your statement is silly!

Level II can be quite intelligible for some traders. I have worked at prop. firm (now trading my own capital) where we traded exactly as momotrader described using Level II and limited charting. I can attest to the fact that it is possible to make a damn good living trading only what information you can interpret from level II. I was by no means the most successful trader in my firm and tend to use charts a fair bit but I traded with guys making six figures who used level II almost exclusively. For these guys charts are almost a nusciance! These guys get so immersed in watching the level II that they can visualize patterns without charts and become very good at anticipating moves in a stock!

I will admit, that for those who merely look AT the level II it can be "unreadable". But for those who look INTO the level II it can provide an amazingly clear picture to a stock's behavior. Looking INTO a level II is a skill and an art and it takes a great deal of time to develop the insight, but to say that it is not possible.... is in my opinion just wrong!

I will add one caveat to what I have just said;

the traders that I have described are able to use the information that they see in the level II to trade (ie. extremely short-term high volume scalping) because their commission structure permits them to do so. Having low trading costs (paying only pass-thru fees) allows these traders to change their positions quickly and often. Add to this the fact that they receive liquidity credits for posting bids and offers, and making large per share gains becomes much less important than for most traders.

So Don, while trading strictly from a levell II 'box' may be prohibitive for traders at your firm because of the commissions they have to pay to Bright, it is not impossible. Only in your world pal, step out of the Bright Trade box.

P.S. sorry if my ending seemed like a slam to Bright, it is not intended to be, but I feel that Don's answer is biased by Bright's business model.
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Level II is readable if you spend a few months attaining "the feel"... the problem is that the moves are not sustainable (lower overall volume) and the moves are smaller (decimalisation-related)... so, whilst it was possible to make a great living in the box in the past, it is much more difficult these days... the risk:reward ratio these days is much too close to parity for comfort... the advent of Supermontage and its effects on the efficacy of a Level II strategy will be interesting...
 
As you look at various styles and posts it is clear to see that one style does not fit all markets. Different markets need adjusting of strategies as we have seen since the market climate has changed.

With this being said it is also important to have a default strategy to go back to when coditions return. So many strategies have been discussed and many work for a time but then things change I think that if a trader can adapt he can survive and be profitable. In other words learn as much as you can and be open to other trading methods or at least be aware of them.

In worst case scenario you always have a back up strategy.
Once again its a pleasure to read the board you actually learn something....

Trade till you drop.
 
Originally posted by Don Bright
L2 is just a way to deceive the unititiated into thinking they can "read" something about something that is "unreadable"...and to think that some "schools" actually teach this junk just cracks me up.

Now the the NAZ is going to more "exchange style" trading with the Super Montage...it will be interesting what "wonders" these schools will teach now.

Oh well, since this is an easy game to keep score of....I doubt that we will have to worry much longer about newbies being taken advantage of.
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THere you go again spewing about the Nasdaq-which you have demonstrated time and again that you know nothing about-and putting your foot in your mouth. You may know a lot about trading and markets, but the the reality is that you would likely have neither the mental acumen nor physical dexterity to scalp trade off the L2 screen as it requires a fast mind and even faster mastery of order execution.

Yes I agree that this style is difficult and is not for 95% of (especially) newbie traders. Is it more difficult now than it used to be? Absolutely -but so are most other styles of active trading in this market. But to imply that it simply does not work again merely emphasizes your biased and uninformed opinion. I would love to see you put in front of a Watcher/Pointdirex/Tradescape type platform and tell you to bang out 100,000 shares in 2 hours, scaling in and out 200 shares at a time, and watch you flail, crash and burn big time.

PS I have said this before but please don't take my comments personally...it's just that you can be offensive when you talk in such condescending tones about things that you have demonstrated to have limited experience with (eg "We tell traders to avoid SuperSOES because market makers can hold their orders.") Why don't you take up the offer from Point Direx and demo their platform with real capital. I will even commit PERSONALLY to spending an entire day with you showing you how to execute in the fashion described in this thread and then perhaps you will change your opinion.
 
Originally posted by limitdown
what software do you use?
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It is almost assured that he uses one of the platforms designed like the Watcher. THis would include Point DIrex, Sonic Trading, Tradescape, Hammer, Greybox, and maybe one or two others.

If you would like to see a live demo of one with live executions and order entry examples, etc. check out the Point Direx live demo at:

http://www.pointdirex.com/live/en/ns/html/livedemo.htm

Note-Zboy I do not work for Point Direx. I trade for them and have been doing these live demos for a few weeks now. If this is inappropriate to post the link then please edit or delete it.



Originally posted by limitdown
Most DA (direct access) software platforms provide a mediocre level of L2 details, which makes the type of interpretation that you mentioned, nearly impossible.
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A Level 2 quote is a level 2 quote IMO. What types of additional info have you heard about....Other than that spewed forth by that Freak SL4CEO who supposedly had Level 9 system interpretation gauged to ascertain the proactive efforts of Market Participants as it relates to their superior yet clandistine efforts in attempting to wreak havoc on the likes of those that would attempt to stand agains them. Remember that thread...oh my that was good.

Level 2 is basically the MMID, size, and price. There were some additional columns with some platforms such as whether or not the MM quote had been preferenced yet (not really needed with SNET/SUperSoes changes) and # times that MM has been at the inside (perhaps this could be helpful). It really comes down to-as MACDaddy implied-developing the art of seeing into the L2 rather than just watching it. THis is as much a function of not being lazy as anything else. Its easy to just watch the prints go off, watch the price rotation etc., but that in itself will lead to more false signals and missed opportunities.

You really do have to tune in to what's happening with the players in that stock at that time and if you flip around from stock to stock out of nervous boredom, you never really get that chance. All my opinion as I myself continue to try and develop this style in to consistent success, but I too have seen guys personally trade this style consistently throughout the past two years....and yes they have struggled more than before but it still works.
 
Come on DAT, you know that I am just talking about the overall numbers (profits) of the nasdaq traders vs. listed traders. We have a few who do well, but as you said, 95% cannot make money on the nasdaq. Perhaps the format makes it seem condescending, but I don't mean it that way. I really don't.

I know that you do well with L2, and I only wish more people did.

What are your thoughts on the Super Montage? Have you thought it through yet...I would really value your opinion...
 
Originally posted by Don Bright
Come on DAT, you know that I am just talking about the overall numbers (profits) of the nasdaq traders vs. listed traders. We have a few who do well, but as you said, 95% cannot make money on the nasdaq. Perhaps the format makes it seem condescending, but I don't mean it that way. I really don't.

I know that you do well with L2, and I only wish more people did.

What are your thoughts on the Super Montage? Have you thought it through yet...I would really value your opinion...
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Don,

Fair enough. I whole heartedly agree that teaching L2 scalp trading to the masses during the bubble was absolutely sickening and a pure recipe for losing money for most who lacked all the attributes mentioned earlier. But you did seem to imply that it was a complete farce for anyone to be doing it.

As far as SuperMontage, I think that only time will tell on what impact it has. I personally like SuperSOES and think it has been a great improvement to Naz trading. If SuperMontage takes it a step further so be it.

I doubt that the major ECN's will ever become participating ECNs in SuperMontage so I think we will continue to access them like we do now via direct connections. Perhaps we will have to look for them in a different place to hit/take their bids offers if SuperMontage ranks them in the montage based on price with fees, etc. THere is some good posts by ThugLife on the SuperMOntage thread you started as well on this issue.
 
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