Is this strategy legit?

Discussion in 'Strategy Development' started by quin8670, Sep 8, 2006.

  1. I just started working for swift trade and it seems like they have a strategy in place that all traders must use. I'm not sure if this is a universal swift trade philosophy but it is at the branch where I am. I believe the strategy is called range trading, but let me explain it: If they tell you to trade a stock that's 3.60, you place bids at 3.59, 3.58, 3.57, 3.55, 3.53 and short offers at 3.61, 3.62, 3.63, 3.65, 3.67. The underlying strategy being that the stock has a range that it usually trades in and throughout the day it will move up and down and you take advantage of it many times throughout the day and make either .01 or .02 per share profit on each trade. It can work pretty well, but it is so dependent on the stock being stable and having a predictable range.

    The question is this a legit strategy?

    The problem is if a stock starts moving quite a bit all your orders will go through and you will have a bulk of shares or vice versa have a bulk of shares being sold short and if the stock continues to move in that direction you will be reaping MASSIVE losses.

    Anyone have any comments?
    Is this swift trades strategy or just my branch?

  2. rebate tradin'.
  3. dear god that does not sound legit to me, imo.

    sounds like they may be trying to generate as many ECN rebates for themselves as possible
  4. I´ve seen that strategy before. It´s legit, and it´s also quite risky. None of those bids or offers are fake, you intent to get filled on them at the time that you placed them, so you´re not manipulating the stock {bad thing to do... according to the SEC} you´re adding liquidity to the stock {good thing to do...}

    Part of the trick for not getting killed when the stock keeps moving out of the range is knowing when this is happening and hitting shift+esc before removing liquidity in the direction of the move... {otherwise known as quickly changing your strategy to adapt to new market conditions}