Liquidity Trading Questions (long)

Discussion in 'Trading' started by Scalpa, Sep 14, 2002.

  1. Scalpa


    I've been liquidity trading for about two months now and have been pretty successful. I started when Worldcom was reduced to a mere penny stock and haven't looked back since. It's often boring, repetitive, and time consuming, but I find the risk to reward ratio highly favorable. I often go an entire day without a single losing trade! This week was slow (averaged $1600 a day) simply because the volume is still too damn low. I'm hoping for it to pick up again soon...

    I'm trying to improve my "game" and would like to use these forums to exchange ideas with other liquidity traders. But for now, I have just a few questions:

    1) What are other liquidity or rebate traders averaging for profits? My post-Worldcom average net profit seems to be around $2K a day. It was MUCH higher before Worldcom was delisted (that was a sad, sad day!) I want to work on getting my costs down even more (if possible) and maybe incorporating the rebates into my trading.

    2) What brokers do most liquidity traders use? Right now I'm using a regular discount broker which charges less than $3 a trade with no share limit. Although I'm averaging 125-150 trades a day and volume of more than 4,000,000 a day, my broker is still getting pretty pissed at the type of trading I'm doing. I've even received emails they've gotten from certain marker makers complaining that I'm "gaming" the Nasdaq manning rules! I got a nice chuckle out of those, but I fear a degradation of service or termination of my account is imminent. So what I want to do is "test drive" a new broker and perhaps add the "rebate" gig to my game. Are there any online brokers that offer rebates on stocks less than a buck? I know Brokerage America doesn't anymore... And if they do offer rebates on sub dollar stocks, what do they charge for commissions? Since I trade in such huge lots, I can't really afford to pay a fee per thousand shares or whatever. I need a flat rate commission. Any ideas here?

    3) This question may seem a bit screwed up, but how does a liquidity trader take a vacation? I haven't taken a vacation from trading (my day job) for over a year. With liquidity trading I fear that if I go on vacation for a week I will be giving other liquidity traders, or really my competitors, the upper hand. I will no longer be "cutting in front" of them by a hundreth of a cent, so they could just sit there swapping back and forth without having to worry about me. It also bothers me to think about lost profits for that week. But I guess that money I make is of no use to me if I can't enjoy it?

    4) Is there a way to find the "real" (not rounded off) bids and asks for a given NASDAQ security? For instance, Level II showed a bid of .80 and an ask of .81 for Palm today. But liquidity traders often fight for tenths or even hundreths of a cent. Therefore, a bid of .8001 and a bid of .8099 would both be displayed as .80 on Level II. Now I know how to view the order books for some of the ECNs, such as Island, but what about market makers such as NITE? Is there a way to find out the "real" bids and asks for the market makers?

    5) How will Super Montage affect us liquidity traders? Will Super Montage affect only ECNs, or market makers as well? Is there a way to find out which ECNs have joined or will be joining Super Montage?

    6) Are there any books out there yet that are dedicated to this new form of trading? I know about "Day Trade Online" but that book is pretty old and deals with scalping NYSE stocks. I find the NASDAQ liquidity trading more profitable with substantially less risk than with scalping the NYSE.

    Thanks for any help,