What is the Specialist Thinking?
- Thread starter El Cazador
- Start date
There was 25000 shares on the offer... the stock was trading a lot of shares and the offer was slowly being lowered. Then people started hitting the offer and it was quickly disappearing so I covered my short and decided to go long 500 for the bounce. The bounce quickly dropped so I decided to take the extra 10 cents and get out. I guess I was just squeezed and shaken a little. I've seen lots of upgrades that drop and then continue to run. The real sell off didn't start until 1/2 hour later... I guess that's just longer than I like to "invest" in a stock.
Leland, I'd rather not say what firm I trade for... I just know the specialists are out to get me
Fletch
Leland, I'd rather not say what firm I trade for... I just know the specialists are out to get me
Fletch
trader58
I enjoyed your comments on understanding how a specialist operates. I trade listed mid-cap stocks. My trading strategy is mainly focused on the bids and offers and momentum of the stock. I send my orders directly to the specialist, so i am at his/her mercy.As you well figured out, the specialist can be my friend or foe at any given trade. Perhaps you can suggest a sight or even a book/magazine or something out there that would better help me understand how the specialist operates(especially in this tough market) all comments and suggestions from other traders, as well, are greatly encouraged and appreciated
thank you.
I enjoyed your comments on understanding how a specialist operates. I trade listed mid-cap stocks. My trading strategy is mainly focused on the bids and offers and momentum of the stock. I send my orders directly to the specialist, so i am at his/her mercy.As you well figured out, the specialist can be my friend or foe at any given trade. Perhaps you can suggest a sight or even a book/magazine or something out there that would better help me understand how the specialist operates(especially in this tough market) all comments and suggestions from other traders, as well, are greatly encouraged and appreciated
thank you.
yent88-
Pretty much everything available in print on reading the tape can be found on this thread:
http://www.elitetrader.com/vb/showthread.php?threadid=1633
There are 2 books on tape reading, both from the 1930s, i believe. For the most part... people that can make money reading the tape don't want to write a book and share their profits with a couple million other players.
Fletch
Pretty much everything available in print on reading the tape can be found on this thread:
http://www.elitetrader.com/vb/showthread.php?threadid=1633
There are 2 books on tape reading, both from the 1930s, i believe. For the most part... people that can make money reading the tape don't want to write a book and share their profits with a couple million other players.
Fletch
Bids and offers are good to look at but the most important thing is the prints themselves. How big are they and where are they taking place...are they hitting bids, lifting offers or are they in front of bids and offers. Some specialists will never show size on the bid or offer. Some do the opposite and show a big offer as the stock runs up $4.
As for books on listed trading...there are none. Most "daytrading" books usually have a chapter or two about listed. This is pain in the ass...but it is also a great thing. Ninety percent of "daytraders" trade Nasdaq or trade listed stocks through ECNs. This is good for us. Because the more daytraders in a stock the more erratic it is and as you can tell from this forum not many people trade NYSE.
As for books on listed trading...there are none. Most "daytrading" books usually have a chapter or two about listed. This is pain in the ass...but it is also a great thing. Ninety percent of "daytraders" trade Nasdaq or trade listed stocks through ECNs. This is good for us. Because the more daytraders in a stock the more erratic it is and as you can tell from this forum not many people trade NYSE.
trader58,
Good stuff and I just want to add a little:
Fletch, if you look at 2 days 1min chart, you would see this:
7/27, DE moved up, so the specialist maybe on the short side (fair enough?), when DE was upgraded by whoever with no fundamental change (earnings/warnings/CEO died) on 7/30, he'd do the followings:
1. Gap up the stock in the way there is no buyers (at resistance level - known as OVERSHOT)
2. Show HUGE size on the offer to squeeze out the sellers (those overnighters who were LONG on 7/27 want to take quick profit)
3. Heavilly short DE himself to average down (in this case, he adds more position on the short side to REDUCE his lost)
So, trader58 was 100% right it's a SHORT on the open, (you were right too by shorting it
then DE went down, to a certain point (42.30?), those who short with the specialist(include you I guess) covered their position (you did), that is what that bump is about, but the specialist KNEW (he has the book)this, and he WAS NOT GET EVEN YET, so, he shorts more and make it weaker, until it finally closed (or close to ) the gap, he is IN THE MONEY, doesn't need to do anything but COVER all his SHORTS, because he knew that eventually, DE would go up (upgraded huh?), so, next time you go long (bottom fishing), wait till the gap closed (or close to be closed or at flat line for a while).
Here is more: when a stock got upgraded, the chances are, the investment brokerage/bank who did the upgrading has TONs TO SELL!, the specialist knows this and play along with that gap-up open.
I am using similar system trade NAZ with great success.
One comment on the tape reading:
People pay attention to the print on size and price, I say, more importantly, pay attention to WHO BOUGHT/SOLD at that price, (I sometimes even write it down roughly) make sure you know if the specialist are NET long or NET short, then trade with him.
Good luck
Good stuff and I just want to add a little:
Fletch, if you look at 2 days 1min chart, you would see this:
7/27, DE moved up, so the specialist maybe on the short side (fair enough?), when DE was upgraded by whoever with no fundamental change (earnings/warnings/CEO died) on 7/30, he'd do the followings:
1. Gap up the stock in the way there is no buyers (at resistance level - known as OVERSHOT)
2. Show HUGE size on the offer to squeeze out the sellers (those overnighters who were LONG on 7/27 want to take quick profit)
3. Heavilly short DE himself to average down (in this case, he adds more position on the short side to REDUCE his lost)
So, trader58 was 100% right it's a SHORT on the open, (you were right too by shorting it
then DE went down, to a certain point (42.30?), those who short with the specialist(include you I guess) covered their position (you did), that is what that bump is about, but the specialist KNEW (he has the book)this, and he WAS NOT GET EVEN YET, so, he shorts more and make it weaker, until it finally closed (or close to ) the gap, he is IN THE MONEY, doesn't need to do anything but COVER all his SHORTS, because he knew that eventually, DE would go up (upgraded huh?), so, next time you go long (bottom fishing), wait till the gap closed (or close to be closed or at flat line for a while).
Here is more: when a stock got upgraded, the chances are, the investment brokerage/bank who did the upgrading has TONs TO SELL!, the specialist knows this and play along with that gap-up open.
I am using similar system trade NAZ with great success.
One comment on the tape reading:
People pay attention to the print on size and price, I say, more importantly, pay attention to WHO BOUGHT/SOLD at that price, (I sometimes even write it down roughly) make sure you know if the specialist are NET long or NET short, then trade with him.
Good luck
I apologize for adding a bit of a digression to this thread but I thought that to those interested in tape reading the following might be interesting.
It was posted today at RealMoney.com by a member/employee (?) of mtrader.com. I'm posting it just for information purposes and not an advertisement nor an endorsement of their site.
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by Chris Schumacher from mtrader.com
XOMA was a great example of an open high break play that we traded for .45 cents only. At the open, it made a high ask of 12 with the market maker JEFF sitting at 12 resistance. The stock sold down to 11.85 creating a .15 cent range. Then as it was getting strong buying at 12 resistance again, we went long with a stop just below the low of the range at .80. This creates 20 cents in risk.
To get a better risk/reward scenario, we wanted to see the stock clear 12.50 and was using the tape reading principle of fast buying (volume spike) into this level so that we could scale out. Fast buying shows that the majority is participating and usually buying is exhausted. As we moved into 12.50, we saw the volume spike and offered out the stock giving us .43 cents in profits on our first 1/2 shares. We then raised our stop to breakeven at 12 and look for follow through on a break of 12.50 resistance with the remaining 1/2 of the position. Unfortunately, as it broke 12.15 mini-support, we had to take the rest of our shares flat at 12 as it broke down.
This is a good example of an open high break play that we used our philosophy of tape reading principles (correlation of a rate of change in price and a rate of change in volume) to scale out of the position. If we had follow through, we scaled out to ride profits a bit longer. We didn't so we sold remaining flat.
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to follow the story you need to look at 1 min chart (a T/S wouldn't hurt either)
It was posted today at RealMoney.com by a member/employee (?) of mtrader.com. I'm posting it just for information purposes and not an advertisement nor an endorsement of their site.
--------------------------------------------------------
by Chris Schumacher from mtrader.com
XOMA was a great example of an open high break play that we traded for .45 cents only. At the open, it made a high ask of 12 with the market maker JEFF sitting at 12 resistance. The stock sold down to 11.85 creating a .15 cent range. Then as it was getting strong buying at 12 resistance again, we went long with a stop just below the low of the range at .80. This creates 20 cents in risk.
To get a better risk/reward scenario, we wanted to see the stock clear 12.50 and was using the tape reading principle of fast buying (volume spike) into this level so that we could scale out. Fast buying shows that the majority is participating and usually buying is exhausted. As we moved into 12.50, we saw the volume spike and offered out the stock giving us .43 cents in profits on our first 1/2 shares. We then raised our stop to breakeven at 12 and look for follow through on a break of 12.50 resistance with the remaining 1/2 of the position. Unfortunately, as it broke 12.15 mini-support, we had to take the rest of our shares flat at 12 as it broke down.
This is a good example of an open high break play that we used our philosophy of tape reading principles (correlation of a rate of change in price and a rate of change in volume) to scale out of the position. If we had follow through, we scaled out to ride profits a bit longer. We didn't so we sold remaining flat.
---------------------------------------------------------
to follow the story you need to look at 1 min chart (a T/S wouldn't hurt either)
El Just found this post and I thank you because this is the stuff I'm after too and I'm sure many others. NOW to top off this post I'm hoping the traders that commented here might look back once again and provide a description of how they entered and exited the trade? Was it a limit or market order and WHY-what occurred that made you use that execution?-was the lmt placed above or below the bid/ask?--by how much?--what were you thinking?-what did you see that made you take the route you did? Did you offer out your stock? Examples of this type I'm sure would be incredibly helpful to many of us. I believe this is the crux of trading the nyse--I know I can spend time in praetorian2's chat room--the call may be to go long xxx--the finesse of working this stock-playing it-- will determine one traders success-anothers failure. PLEASE feel free to discuss-(dissect)-other trades-perhaps a trade you made today-dissection is the key -much thanks
Fletch and trader58
thanx for the good tips. I read through the thread and looked into the books. i found the book titled "tape reading and market tactics" by Neill. seems like a great place to start. I also registered for a trial membership at realitytrader.com. they seem to have a whole training seminar on tape reading and more. once i read it, ill share the info with everyone.
limbo-
i see we're in the same boat. perhaps we can share ideas on nyse tape reading etc. as we discover them.
good luck trading eveyone!!
thanx for the good tips. I read through the thread and looked into the books. i found the book titled "tape reading and market tactics" by Neill. seems like a great place to start. I also registered for a trial membership at realitytrader.com. they seem to have a whole training seminar on tape reading and more. once i read it, ill share the info with everyone.
limbo-
i see we're in the same boat. perhaps we can share ideas on nyse tape reading etc. as we discover them.
good luck trading eveyone!!
Babak,
Chris Schumacher here from Realitytrader. I was reading through the posts and saw that you had listed one of my video trade reviews that I put into text for the group. While I appreciate you taking the time to offer any information from me that you felt could benefit your members, I wanted to mention that I am no longer with MTrader.com ( not since July 2000 ) Not a big deal really, just two different styles. Ken still uses momentum that is not based on tape reading principles. Threei (Vadym) and I have refined our approach based on tape reading principles (how the minority benefits from the crowd)and mixed in some help from our TA partners, Bo and Russ.
I hope everyone continues to work through this Bear trough and I'd be happy to answer any questions here on how our tape reading principles differ from those that just think it's watching a Time and Sales or Level 2 screen <which misses the whole point of tape reading>
I enjoy your posts Babak. Please continue to contribute.
All the best,
Chris
Chris Schumacher here from Realitytrader. I was reading through the posts and saw that you had listed one of my video trade reviews that I put into text for the group. While I appreciate you taking the time to offer any information from me that you felt could benefit your members, I wanted to mention that I am no longer with MTrader.com ( not since July 2000 ) Not a big deal really, just two different styles. Ken still uses momentum that is not based on tape reading principles. Threei (Vadym) and I have refined our approach based on tape reading principles (how the minority benefits from the crowd)and mixed in some help from our TA partners, Bo and Russ.
I hope everyone continues to work through this Bear trough and I'd be happy to answer any questions here on how our tape reading principles differ from those that just think it's watching a Time and Sales or Level 2 screen <which misses the whole point of tape reading>
I enjoy your posts Babak. Please continue to contribute.
All the best,
Chris