Trading Pre and the Open

ronb107,

If you only trade listed, be aware of the spread/fill there, I am pretty new to NYSE myself and I can tell you, if you get used to NAS, it is hard to trade listed, i.e. it takes a WHILE for the specialist to fill you even you hit the bid trying to get out a falling stock (The rule is, if I remembered correctly, 2 MIN at NYSE vs. 17 SECOND at Nasdaq, to fill you).

2nd, the spread is usually BIGGER than the naz stock, (about .10 at NYSE vs. .01 at Naz), so this makes "Cutting Lost" harder (1K share, when it against you, you lost at least $100 if you are lucky to get filled!)

3rd, it is hard to see the depth of the bid/ask...with only the pros on both list, they NEVER show you the true size (at Naz, at least you have the HONEST ECNs)... i.e. you see this at NYSE:

Stock: MU

Name--Bid----Size-----------------Name--Ask----Size
NYS----38.38--100-----------------NYS---38.39--200
CSE---38.29----1-------------------PSE---38.49----1

Don't think the spread is only .01, he(NYS, the specialist) can drop it even AFTER you hit him on either bid or ask if the stock is moving cuz the 2 MIN rule! and if you try to get out, you can't be sure cuz the others CSE/PSE only shows 1 on size...and always remeber, they are PROS!(at Chicago and Phili)...

after reading the above, don't be discouraged, it can be done, praetorian2 at this board is THE man on listed, his bottom fishing/specialist reading skills is awesome,(backed up by guts and deep pocket) and I think that's the way (reading specialist) to trade at NYSE, be specailize on certain stocks,(30 stocks are too much IMO, if you can get to know 5, you will be rich pretty quick) watch the specailist for a month, write down how much he bought/sold based on prints (like card counter at casino), trade WITH him, not AGAINST him.

Good luck.
 
LoneHand, Babak, dozu, praetorian2 (is there a 1?), et, al:

Since I'm new to daytrading, I'll start with the more orderly market of listed stocks.

Of the 33 stocks listed in my last post, I was planning to focus on up to 10 stocks (and trade 2-3 daily); the idea being that I should have a stock for the each sector (this way I can cover most of them).

While the NYSE only shows the inside bid-ask, I see prices on other exchanges which tends to provide some idea of depth (ex., PHS, CIN, PSE, BSE). But, I suspect reading the tape of watching the Time & Sales would provide a clue as to direction. BTW, the spread did not look bad on most of these stocks.

A couple of strategies I had in mind are...

o Use the pre-market to trade on news. For example, if a company posts bad earnings after the close, I would buy at the pre-market in anticipation of the stock rising before 11am.

o If there are any Gaps at the open, I would fade the gap once it reaches a Resistance or Support point. This provides a high reward/risk ratio.

o When I get some experience, I might also consider scalping (a future strategy with listed stocks).

Thanks for your feedback. Let's keep it going.

--Ron






 
First of all, forget about depth information, nobody at my firm looks at what hell is going on at other exchanges, total noise most of the times. You are not trading Nasdaq here, you are trading NYSE, and tape reading is the most important skill to have. You don't have a Level 2, live with it.

As far as the stocks you picked out are concerned, those are some of the toughest stocks on NYSE and some of them are on Worldco's restricted list for new traders. You can easily get hit for a point on some of those stocks and the specialist in those stocks will shake and wiggle A LOT, to make that point you will have to sit through some serious shakeout's.

When you are new, I wouldn't recommend the fade the gap strategy because you don't have access to bullets, when the stock starts to weaken (ASK shows up with size) you will NOT get the short fill from those specialists, and getting in there early with any one of those stocks can mean losing half a point in literally one print or two . . .

Let's go over your list of stocks. None of those specialists are easy, but I will rank them based on how close they follow the indexes.

BBY: Great RLX stock
CRA/DNA: Great BTK stock
DGX/WAT: BTK laggers.
LH: Good stock, doesn't follow anything, after the split the spread is more manageable, but still large. Tough as hell, Mrs. D's number one stock.
IBM: Very good stock with S&P futures.
MWD/GS/LEH: Great XBD stocks
IRF/MU/ADI/TER: Great SOX stocks
MMM: Follows CYC/DJI
KKD: I would say avoid, doesn't seem to follow anything and you can't short it.
LXK: Nasdaq futures mostly.
AGN: Follows DRG a little, not too close, tough as hell but Mrs. D's number 2 stock.
LLL: Nasdaq futures mostly, behaves weird sometimes, avoid.
SPW: Avoid at all costs.
BRL: Follows DRG a little, be careful.
PGR: Great IUX stock
VAR: Hmm, not sure.
CPN: Good UTY stock, although it can lag the index sometimes.
DYN: XNG
CLS: Nasdaq futures and a little bit SOX
UTX: CYC/DJI, not as good as MMM but it lags a little, helpful.
SFA: Nasdaq futures
SGR/FLR: I belive those are home constructions, trade with news only.
CAM/SII: Fastest movers in OSX
JEC; Not sure

I think at least 1/3 of those are on our restricted list (which updates itself every week), as a new trader you will get a lot of calls from risk management if you trade them, and I think you will lose a lot of money trading those too. I will e-mail you my watch list of about 130 stocks across all sectors (built the same way as you built yours, is it BEI?), with 1.5 point intraday move (last updated 3 weeks ago, but those things don't change much). I would recommend starting out with a few tier 2's (for example, NE/WFT in OSX instead of SII/CAM).

I know a lot of traders don't believe in playing the open and a lot of traders don't believe in news research. If you play the open, you gotta do extensive news research, if a leader stock in a sector has bad news, short all the other stocks in the sector that didn't gap down . . .

I don't think you can trade on NYSE pre-market unless you have access to instinet, the best you can do is the opening print.

None of this will matter anyway, I prepared an awful lot before I started at my current job, yet I ended up trading totally different strategies from what I originally visioned. Depend on where you sit you will most likely pick up the style that is dominant in the area, just be prepared to lose a lot of games and you will be fine, KEEP THE LOSSES small, that is about the only thing you can do as a new trader.
 
Hitman:

As always I appreciate your input.

I didn't know if there was value in watching the other exchanges for listed stocks, so I threw it out there for a response.

I'm not surprised that Tape Reading is important. Yet, what is one looking for when reading the tape? If it's to see the breadth of the market, wouldn't watching the indices be easier? If it's for a specific stock, wouldn't Time & Sales be a better approach?

BTW, I've compiled the stocks by index (per your post) and ran a correlation analysis for each over one year. Below are the results (anything over 600 is a good correlation; the higher the number the better):

BTK: DNA(645);CRA(804);DGX(290);WAT(538)
DJIA: MMM(604);UTX(551)
DRG: AGN(428);BRL(236)
IUX: PGR(775)
NDX: CLS(803);LLL(128);LXK(416);SFA(724)
OSX: CAM(775);SII(948)
RLX: BBY(371)
SOX: ADI(833);CLS(676);IRF(782);MU(821);TER(781)
SPX: IBM(419)
UTY: CPN(466)
XBD: GS(807);LEH(817);MWD(856)
XNG: DYN(555)


--Ron

 
Damn, where did you get those precise numbers? I noticed you do things in a very planned/precise manner, I am almost ready to say that you will almost certainly hit it big here at WorldCo based on your morning plans alone. Very very few traders at my firm go into the game with a written plan. All you need then is getting your plans wrecked a few times (lol), get some valuable experience and you will be set. I can already tell you will probably be very disciplined . . .

You watch the tape to determine entry/exit points. Mrs. D. doesn't even have a single moving average on her charts, she looks at the overall index, overall market, then the rest is tape work. She flips morning short positions frequently on reversals, and good tape work is a must. Reading the specialist is the toughest thing to master on NYSE.
 
Hitman, Praetorian2 & other NYSE guys,

I have traded Nasdaq stocks ever since I started trading a year and half ago, I am totally lost when it comes to the NYSE. I would "watch the tape" on some stocks and see prints way below or way above the market. What is that? I thought trades had to be reported in real time on NYSE unlike Nasdaq where you can see old prints. What do you watch for besides the size on bid/ask, speed, trades between the spread etc. And what's more important?
I watch some NYSE stocks (GS, MER, SFA, KKD)more like casually because I can't really figure out what they are going to do so I won't trade them. I also trade for points (limited capital)so I think Nasdaq is better for me now. Unlike on the Nasdaq, NYSE stocks don't make many intraday patterns, like triangle, flags, candlesticks etc. They always seem to reverse sharply without warning as soon as they moved a point or so.Some of those names mentioned above have intraday charts just about unreadable for me. Do you watch 5, 3 min charts at all, or lower time frame? I wonder why pro's say NYSE is better and Nas is for the crowd, Nasdaq seems easier to me?

Any comments? Thanks .
 
Originally posted by shyhh
Hi everyone,

Can i ask what is "fade the gap" ?

Thanks !
More...

shyhh,

Fading the gap means to short a stock that has gapped open, or to buy a stock that has gapped down. So for instance if XYZ gaps up at the open by $2.00, you short it, as most stocks that gap open will retrace at least some of that gap.
 
Kicking, I have a list of like 15 nyse stocks I refuse to trade. All 4 of those are on the list. I occasionally trade kkd, but besides that, sfa has cost me about 10k since I started, and the rest have destroyed me as well. They trade too irradically. As for someone posting some correllation to an index... That's a load of bs. Stocks don't move on indexes. They move b/c of supply demand at that specific moment. I don't ever look at indexes. All I watch lately is just a 5 or 15 minute of the sp futs just to get a general idea of things. It's all about reading the specialist. If you intend to read the specialist, get some capital together, find a cheap broker, and just watch something trade. Watch something slow preferably. Watch FORD. It trades in a .7 range every day. The thing is that it will give you 2-5 opportunities daily to scalp 20 cents. Get good at something like that. Then move onto harder things that move faster.
Ronb. I don't know who told you that thing about looking for stocks that move at least 2 pts. I almost always trade things that move under 3 points daily. I hate risk. I get stuff wrong almost 80% of the time. But I keep dime stops usually, sometimes less, and when I finally get it right I bank big. Here's my experience with the stocks you listed as i've traded almost all.
BBY- impossible specialist to read. I don't bother anymore.
DNA- I've had pretty good results. If you catch a bottom, it can give you a 5 point gain easilly. It's a bit hard to get fills though.
DGX- I haven't had a chance to trade it since the split. It was very illiquid then and often would move 2 points on 500 shares. I assume it's the same.
LH- This stock has a pretty wide spread, but he gives you good fills. It's a reliable trader for a few points, and usually continues in the same direction all day once it's established a direction.
IBM- (I'll Burn you Majorly) It has a tight intraday range, and cause it's over 100, it eats up too much capital to make any move worthit. Fills are usually poor as well.
MWD- I have no experience.
MU- I have no experience. (I usually avoid anything tech)
GS- It's an expensive stock, and it can get away from you fast if the futs run. You said that you had very little capital, why take a few hundred of this, when you can take a few thousand DIS and scalp that? I use GS as my indicator whenever the futs are moving fast.
MMM- Another expensive one. Why bother? I always have gotten wierd fills.
LEH- No experience.
ADI- This is an amazing stock to trade. You might want to spend some time on this one. I have never had a loosing trade on this stock in about a dozen scalp attempts. It trades with the futs, and you can get great fills on size market orders even when he's showing 100 shares each way. Pretty active island guys too b/c it's tech.
KKD- See above.
LXK- This thing doesn't seem to ever do anything.
AGN- This guy loves to blow stops. It has decent liquidity, and moves well.
LLL- Too expensive, no liquidity, has lots of really fast jerky moves.
SPW- Decent stock to trade. When there's news, you can pick off a few points easilly. Otherwise, it's best to avoid.
BRL- Not enough experience.
PGR- too expensive, no liquidity
VAR- Too thin, spreads are too wide.
CPN- Not enough experience.
DYN- I've made good money on this one. I would recommend it as a trader.
CLS- This is another great stock to play on the open. There is good liquidity, and you can count on him blowing all 3 stops in the first 20 mins, so if you play that, you have 3 scalp opportunities to take a half on a few k shares.
UTX- Never seems to do anything
WAT- Not enough experience.
SFA- STay away. I'll never trade that mess again.
SGR- Not enough experience.
FLR- Good liquidity, it can move fast on you though. I like it as a trader, but it's impossible to read that specialist (at least the 1 time I tried)
The only other i've traded is CRA, and I don't recommend that one. It's impossible to get filled when you want.
As you can see, there are like a half dozen out of all of those that I like. I recommend just trading the slower ones, and using more size to take smaller scalps.


 
While I agree ultimately it all boils down to tape reading, I have to say based on my experience (and many senior traders at my firm) stocks do move with indexes.

The indexes IMHO are every bit as significant as futures (in fact, for many sectors it is far more significant than futures), the key is to find stocks that actually trade with indexes, and of course not all stocks have an index to move with. If for whatever the reason people are buying chemical stocks, looking at the CEX is the best way to spot it.

I understand we all have different styles and bad taste in our mouth with certain strategies, but sector indexes is a HUGE factor of many successful traders at this firm, and my performance is no indication of how useful they really are.

I have seen traders taking 8 positions in the same sector off the open and only watch the indexes and chart, with very little attention paid to the tape. I have seen people taking more than 100 positions at a time (no joke), and he barely has time flipping through individual charts, let alone tape. This particular trader made 2.5 million last year and was one of our top ten traders.
 
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