Trading based purely off Nasdaq L2.
- Thread starter momotrader
- Start date
Uh, this is where the Waiter asks to see the money, because he doesn't think the dining couple will be paying for the meal....
Uh, MoMo (Museum of Modern Art), where are you going with these questions, and why are you asking them. It seems that on other threads (historical reference to previous discussions here), these very same "informative question approach" was being used by MM's, and other Institutional Traders who needed to know about the other side of the trade. I didn't exactly get proper answers regarding your L2 configuration (not that you have to, or should have responded, but, nonetheless). In the atmosphere of sharing, should we/would we expect to hear more from you, being a new member here, as to what you trade, or how your box is configured, or what you'll be doing with these answers, other than just being curious....
Uh, am I alone on this one?
uh, perhaps, I'm reading the patterns within this box discussion, but it seems that information like that would be very useful in designing a highly profitable stategy of trading contra to those answerw, should they come....
Seems like GSCO, LEHM, MKXT have upped the bid, and then dropped to cross market, then took tha ask.
So much for reading patterns in the chaos...
Seems like GSCO, LEHM, MKXT have upped the bid, and then dropped to cross market, then took tha ask.
So much for reading patterns in the chaos...
I would say that the majority of traders at my firm (myself included) scalp for pennies on high-volume stocks like SUNW, CSCO, WCOM, JDSU, INTC, etc. If you're good at it you can actually make a pretty consistent return with limited downside risk. However, due to the recent lack of volume/volatility and the heavy competition amongst scalpers, I'm finding it's becoming very easy to get jiggled out of positions nowadays. LSPD can be quite annoying too. It's also a somewhat mentally draining style of trading. There are a few traders at my firm who those trade less liquid fast-movers but it's generally frowned upon by management because of the added risk involved.
Anyway, as far as tools are concerned. The realtimefutures.com squawk box can be a very useful tool when determining a stocks movement over the next minute or so. If you hear Ben calling big moves (accompanied with the pit noise in the background), chances are definitely favorable for a stock move in the same direction. Obviously, it won't work all the time, but it does more often than not. I find it particularly useful immediately after economic announcements. I also like to keep a close eye on the Nas (emini) ticker since most of these big-volume Nas stocks follow the Nas closer than the S&P. The usefulness of these tools varies from day to day (and from hour to hour for that matter).
I also like to use 1 minute charts of the stock and indexes to get a better feel for important levels of support/resistance and general trends and momentum. But that of course is secondary compared to Level 2. Observing huge levels with market makers and ecns who are repeatedly holding levels will give you a better idea of support/resistance than any chart.
LOL, well, that was a most amusing analogy I've seen in a while...
I haven't actually seen the threads by the MMs or other institutional traders on here and I can't imagine why they would bother...
I thought I answered your L2 questions fairly straightforwardly, other than telling you straight out what software I use. I told you (as DATTrader also pointed out), I use a software based off the Watcher platform. Nothing special. L2 is L2. I don't have bells and whistles that go off when a big buyer or big seller comes to the inside market in my stock... I'm a bit confused as to when you say "how my box is configured." The "box" refers to L2, that's it. You can't "configure" L2. If you're asking how my screen is configured -- all I look at to trade is L2, T&S and the position minder/FYIs.
The main reason I started this thread was to get a gauge of what "style" other Nasdaq L2 traders trade. My firm is fairly narrow about the way we allow traders to trade, and I just don't think that, in this current market, whacking around for 5000 shares in and out, in and out, of (insert former high-flying tech stock here) is exactly the best way to make money.
I'm currently experimenting with very low liquidity stocks (<1m) that have news that cause a volume spike to make them more tradeable. If you've ever watched a stock like CHKP move, then watch a stock like oh, let's say, GETY for today... you'd see a *huge* difference in how clean the moves are. Because of decimalization, in order for CHKP to even have a "move," it has to get through tons of levels... now if you watched GETY trade this morning, the moves were clean... like the days of fractions. You try to get in on the bid, pay the 10-15c spread if you have to, the buyer comes up, and the stock cuts through about 70c of levels like a hot knife through butter, no 5000 ISLDs scrambling all over each other trying to get sales at every penny level. Back then, 1 tick in a stock was usually 1/8 = 12.5c. Now, you have "moves" in the techie stocks that are like, 5c. That wasn't even a tick back then. These low liquidity stocks "trade" like they're on fractions still.
There's that swing-trading guy that writes articles on realmoney.com, and he doesn't even swing-trade tech stocks, because he feels there are too many daytraders in the tech stocks that causes too much noise and too many "fake" moves. I feel this applies to daytrading the same stocks as well (as ironic as that may be).
So, that's the reason I ask, because I'm wondering if other Nasdaq L2 traders out there that don't depend on charts are finding the same thing, that despite how lousy and hard it is to trade the tech stocks now, that there is *tons* of money to be made in these little stocks no one's ever even heard of.
That's why I think there's a better way to trade off L2. Because it's so much "harder" and mentally draining now. You're fighting scalpers all over the place just to get hit on the bid or to get a sale on the offer. The noise quotient is a lot higher, and combined with the lower volatility and volume, it's a lot easier to get shaken out of your position. You end up whacking in and out, paying lots in commissions and eating up your net P&L.
You said you have traders at your firm that trade less-liquid fast movers... but it's frowned upon by management. That seems to be the same deal at my firm. I'm wondering if *all* firms are like that. More risk for the firm yes, but much better reward for the trader. I would think that daytrading firms (especially prop firms that pay their traders draw and only give partial payout), would want their traders to succeed and make money no matter what style they're trading. It's clearly *much* harder to trade the highly liquid stocks based solely off L2 now than before, but there's so much money out there in the less-liquid stocks if you are able to trade them.
We don't even have ready access to real charting at our firm. So I only pull up DD charts to tell where daily support/resistance is and where I should start to watch a stock for some kind of actionable area. I also watch the Nasdaq futures to get a feel for how strong/weak the market is or if we're trending. I've found that relying too heavily on the futures can be dangerous though, as many "market" stocks will move counter to the market at the worst possible times.
momo-- Well said. Although I don't scalp, I have been playing the lower volume issues with a very good degree of success. What I usually do is build up a position and sit tight and wait for a move. The problem with that is these babies can lay dormant for awhile and tie up your capitol. However when the run starts, it's very clean, head-fakes are minimal, and almost always ends with a parabolic blow. Very readable but if missed... well you get the picture. Liquidity dries up very quickly. Many traders frown upon these but a 20% gain is a 20% gain. No matter if It's a 30.00 or 0.30 cent stock.
Sorry missed this one. Point Direx is very very reliable-especially with its most recent version of Platinum. Since I have been on it (over three weeks now) I have not had one single crash, log off, or stuck quote. It is extremely reliable.
I would say the platform was designed around a more active style for sure, but having said that I think it makes sense for any trading style, unless perhaps you open/close large positions all at once since the cents/share model can actually hurt you here.
However if you trade larger longer term positions by scaling in and out, I think it makes tons of sense because at .007 cents/share its cheap and on top of that, if you refine your execution skills I assure you that you will buy more stock on the bid, sell more on the offer, and take offers/hit bids that you would have missed before. Its order entry and execution capbilites are tremendous.
Finally, I have never used IB Best route before and I am obviously biased, but I would speculate that Point Direx DORS technology (smart routing) would kick its AAAASSSSSS.
Pointdirex??
"Since I have been on it (over three weeks now) I have not had one single crash, log off, or stuck quote. It is extremely reliable. "
I know you discussed this some on the Tradestation thread a while ago.
But, may I ask now, why you decided to go with Pointdirex instead of Tradestation, as you probably investigated them all?
Do you have speed keys for order routing and order placement?
I urgently need to get off of PT for several reasons and especially on to a more reasonable commission structure.
But I don't know how I could adjust to trading on Tradestation without speed keys and window linking.
Thank you for your reply, DaTTrader.
Much appreciated, Mike
"Since I have been on it (over three weeks now) I have not had one single crash, log off, or stuck quote. It is extremely reliable. "
I know you discussed this some on the Tradestation thread a while ago.
But, may I ask now, why you decided to go with Pointdirex instead of Tradestation, as you probably investigated them all?
Do you have speed keys for order routing and order placement?
I urgently need to get off of PT for several reasons and especially on to a more reasonable commission structure.
But I don't know how I could adjust to trading on Tradestation without speed keys and window linking.
Thank you for your reply, DaTTrader.
Much appreciated, Mike