not to take the light form you hitman, but damnit I had the worst day in along time on my books too. one trade 500 shares and kabooooommmmm!!!! ok my style is swing trading so it porbably doesnt belong here but man i'm feeling what yorue feeling, after three weeks of working hard, plannig trades, slowly building up and then suddenly one trade and on unlucky afterhours announcement and thats it. I guess i just want to say that a loos like that is devastating, mentaly that is!!! big time! i placed the trade well, it is just one of those big risks that swing trader takes and that is the damn earnings warnnings that you simply dont see, and thats what did it. Ok 3 hours later and i'm taking the loss a little better, but still it now makes kinda affraid to pull the trigger again- its funny you read the books on psychology and all but there is nothing like experiencing it in real life. OK lesson learned and felt- for a while too. Better luck next time. Sorry for blabeling on and on, but i felt like i needed to get it off my chest. ok, much better. thnx for reading.
Hitman, Even tho I only trade Nasdaq, all this time I thought that Nas market-makers were selfish, nasty, money-grubbing SOB's, whose only concern was the almighty $$. And everything I've been told or read about Specialists paint them as honorable people who are entrusted with the noble task of maintaining an orderly market, willing to be the buyer/seller of last resort when no one else will step up to the plate, blah blah blah. Yeah, right. I took a tick-by-tick look at DST, the stock that cost you 2 1/2 pts, and frankly I'm amazed. From 11:49 when it printed at $54 to 11:59 when it printed at $50 it made a couple of full $1 moves, often on zero or very little volume. Orderly? I've always read that orderly meant the specialist had to move the price up or down in discrete steps, not jumping leaps 'n bounds like those dastardly MM's do. The very next minute, at 12:00, on the huge (?) volume of 2500 shares the specialist saw fit to drop the price, in one fell swoop, from $50 to $48.50, another $1.50 drop in one print. Orderly? I don't think so. I suppose this is one isolated case (or is it?) but somehow I feel better trusting a large number of people's (and ECN's) conflicting self interests rather than one.
Actually given the circumstances I don't think the DST specialist violated his obligation of maintaining an orderly market. Orderliness has to be judged with regard to the supply/demand picture at the time. The specialist is not there to play good samaritan. All those one point gaps between prints happened on massive block volume and this stock is very thin anyway averaging just 350k shares per day. While in a similar Nasdaq stock there would have been a larger number of smaller prints scattered about, the gapping price action witnessed in DST is due to the continuous auction style of price discovery on the listed exchanges. The specialist is trying to aggregate as many orders as possible into a single print at a price that best represents the supply/demand situation at that point in time (that's also how price improvements occur).
The specialist did what he had to do. I was just too stupid and totally underestimated how much can 300 shares hurt.
dlincke, Actually given the circumstances I don't think the DST specialist violated his obligation of maintaining an orderly market. Orderliness has to be judged with regard to the supply/demand picture at the time. The specialist is not there to play good samaritan. I guess it depends on how you interpret orderly and I've never seen a definition that didn't include the concept of discrete steps as opposed to mid-day gapping. And, no I didn't think he was there to play good samaritan, but I've been told over and over that when there are no buyers that's his job. Part of maintaining an orderly market and all that... All those one point gaps between prints happened on massive block volume and this stock is very thin anyway averaging just 350k shares per day. Some did, but not the largest gap of all ($1.50) which happened on a measly 2500 shares.
Actually....DST was in the middle of their conference call. They said something the analysts didn't like. Next thing you know there are NO BIDs on the specialists book. I knew the CC was going on but couldn't find out the number to hear it. So much for Regulation FD. My friend and I used to trade at the Worldco Office on Wall Street. When we saw DST getting smoked we knew Risk Management would make an announcement in the city. "DO NOT BOTTOMPICK DST!!!!!" DST was actually very tempting. And I have gottten very good at picking bottoms lately...BUT their was one problem. I HAD NO CLUE WHAT WAS BEING SAID AT THE CONFERENCE CALL!!They could have been cuttin estimates in half for all I knew. I was very surprised that it went through 50 like it wasn't there.
Orderly, lol! C'mon. Would you rather trade against one market maker (specialist) or lots of them and ECNs? Since I got robbed on AOL more than a handful of times by the specialist back in 1999. I stopped trading listed stocks. Thsese guys are good and they will most likely take your money. Daytrading history 101. First there was SOES and Level II. Next, there was twice the volatility of the NYSE. Then, daytrading was born. The goldrush was in 5th gear and then: Traders lose money. Blame Nasdaq. Blame volatility. A new story is born. Trade listed stock it is safer. hahhahaha. It is safer only for the broker. The entire bull that is being sold out there is what used to be sold by Block Trading on Nasdaq stocks, (later it was repackaged by outfits such as Online Trading Academy and Pristine.com). The training is geared towards one thing. Generate commissions for the house. The game is still the same. The players and uniforms have changed. Bill BTW, price improvements also happen when the specialist fron-runs your limit order. Decimalization was a great idea for the NYSE. It kills the Nasdaq market makers, yet it makes the specialist richer.
Since this is my first post to this thread and additionally I'm pretty new to this community I will preface my first comments to this ongoing thread with the following... A. I've yet to trade listed stocks so I don't know a damn thing about it. B. I commend Hitman for his daily posts and I enjoy them immensely. I find him honest, open and disciplined. I also find him incredibly narrow minded and egotistical about the way he has chosen to explore this business. His 'if you're serious you'll understand my points' position is a real hoot (I'm serious, my account proves it, and no I don't always understand his points or agree with them). His 'if you're any good you would be running a hedge fund', etc is also a laugh (how about I have no desire to run a hedge fund???) In summary, I like him just the way he is, enjoy his writing and wish him the best. Now, for the meat of this post... I would never want to attempt to trade like Hitman. There is too much "safe" money to be made in very liquid Naz issues to be fooling around fighting for scalps in thin stocks that run in one dollar increments out of the blue. Additionaly I find crowd psychology much easier to predict than individual(specialist) psychology and appreciate the fact that if a MM (or anyone for that matter) is acting against the crowd on the Naz they stand out like a sore thumb. I don't want to sound anything like the round with TraderRX a while back (who clearly was participating in classless goading), but Geeez -- my little basket of 12 mid-cap Naz issues gives up a lot more on a daily basis (13.4 points today) with a lot less margin and bells and bullet whistles then the struggles I read about here. I wish Hitman the best, but boy am I ever happy to be making a small killing in my fuzzy slippers without Mama (Risk Management) telling me where not to trade. JB
"Would you rather trade against one market maker (specialist) or lots of them and ECNs?" The worst thing to do is to trade against the specialist. You have to watch the prints and the size of the prints...then you figure out what the specialist is doing. Because Rule #1 of trading listed stocks is trade WITH the specialist. I have never traded NASDAQ so I won't tell you one is "better" than the other. But I know that they are both hard. But what I hear from people that trade both is that NASDAQ is more erratic and NYSE is better to learn on. Volatility is higher on the Nasdaq so hypothetically there is more chance to profit form fluctuations. The Succesful Nasdaq traders I know specialize in a few (3-5) stocks. This is to learn the tricks of the many players involved. Nasdaq is theoretically more trasnparent than the NYSE. But basically there is more lying. Like a MM showing 100 shares to buy..but basically he has 100,000 and is refreshing his quote every time he is filled. The bottom line is, that this business we have chosen is hard...regardless of what you prefer. And thats just what it is. I believe OTC is suited for some people while listed for others. But no matter how you cut it Specialists and market makers are both...CRIMINALS. We have sort through the "noise" to see the true market.
To trade NYSE well, you must be able to read the specialist. To trade Nasdaq well, you must be able to read charts and take a guess on crowd psychology. It then simply becomes a matter of determining whether you can do both or one of them.