Good thread. Here is what I do: Buying: If I really want in, I use ARCA to "penny up" him on the bid, the whole world will see my order, and if he penny up me, then I cancel and penny up him again.(other people use ISLD which is fine, the difference between them is: ISLD show one entry on L2, while ARCA shows three: ARCA, ARCHIP, NAZ) If I don't like the stock that much but still think it bottomed, I just send limit order at bid and route it to ISI (note, don't penny up him and route it to ISI, he won't even show your bid if you are trading 500 to 1000 shares like I do!) Selling: When I really want to get out, penny down on the offer on ARCA - do not hit him on bid, or selling under bid, he will hold you for a min and half and drop the bid and won't fill you. Use limit order sell with him at offer using ISI route when I am not that scared. When all fail, use mkt order (I only did it couple of times when my L2 dead, I can only see my 1min chart) I only trade 500 to 1k shares on NYSE and I use RealTick, so if you are bigger, your experience may vary. Good Luck
LoneHand, When using ARCA to " penny up" is your order being routed to NYSE as an ARCA give-up, or is your order simply posting on ARCA on level II? I did not realize ARCA was a NYSE member
Nordic It just sit on ARCA, but you see this on L2: Arca 15.01 Archip 15.01 NAS 15.01 NYS 15.00 Arca has changed its routing recently, check out arca's web site. Good Luck
Lonehand, Do you find that you often get filled using ARCA for listed stocks or do people just trade around you? I see those ARCA orders get traded around quite often it seems... Leland
I have a question re: stock trading to size. Take a stock XYZ quoted at 40 bid 40.05 ask size 50 x 50 then suddenly size changes to 50 x 300. Scenario # 1: Trader hits the bid, XYZ trades down 15-30 cents giving trader a nice scalp. Scenario # 2 Trader hits the bid, XYZ ticks down a couple of prints then a huge print cleans up the offer and goes up 20-30 cents. My question is: all things being equal (i.e. SP quiet, no news in the time frame) what factor should I consider to make the directional bet? I've heard several explanation for the "size" display such as the specialist is accumulating for his own acccount and is shaking up the newbies by making the stock look weak. If that is the explanation regarding the stock trading to size and going up. How can you explain the motivation of the specialist in showing heavy offer size and going down as in Scenario # 1. I've seen scenario 1 happen 70% of the time in certain stocks while happen only 20% of the time in other stocks. Would anyone be kind enough to share his/her insights. Thanks
IMO, it depends on the specialist. These guys have different styles and methods of accomplishing what they want to do. On some lighter traded issues, I can sometimes tell when the regular specialist is out sick or out to lunch by the way the stock behaves. It sounds like you know the game well enough to profit from it. While there could be a number of reasons why they do what they do (since the specialist has more leeway), I'd just jump in and try to score from the action. Good Luck.
GATrader: Looking at a "snapshot" of one moment in time of a stock's bid and ask is probably not enough info to make an informed judgement. Certainly if the offer is significantly larger than the bid (as per your example) then we would have a bias towards the short side, but there should be other factors involved. What is the overall trend of the stock that day? What is the short term trend like? What has the tape been telling you the last hour? Can you identify a real seller(s)? What kind of prints have been going up? What kind of size has been on the offer throughout that day? Have you tracked that stock before - what are its tendencies? There are a number of reasons why a relatively large offer would appear. There could be multiple sellers, all with a few thousand shares to sell (more likely to occur at important price levels - .00, .25, .50, and .75 cents). There could be an institutional seller who wants to see if he can generate some interest by "flashing" a size offer. It could be a smaller firm that only needs to sell that amount and drops it into the Dot machine with a limit. Or it could be an aggressive seller who has size behind it and needs to be out (the case we all hope for). If I as a trader give an order to sell 30,000 shares of XYZ @ 40.05, and I want the order shown, the specialist has to show it. He can put a BS offer of say 100 shares below the offer, like at 40.04 to hide it, which is fine. But most institutional traders who are working a large order will give the specialist some form of discretion as to not scare away the other side. If trading were as easy as looking at a spread and then going with the size, we would all be rich. Your job as a trader is to do some detective work and find the clues that will help you make an informed educated guess about the future direction of the stock. If you can be right over 50% of the time, you've just gained an edge and you'll be on your way to being a profitable trader. Another thing - don't second guess yourself about than "tricks" that a specialist may be playing or another trader for that matter. Most people assume that when a trade goes up that the specialist was involved personally buying or selling out of his inventory. This is simply not true. The majority of the time the specialist is not involved. His job is to maintain the market, and he puts the buyers and sellers together and works the bigger orders. Since the specialist sees all of the order flow, he clearly has an advantage that you or I don't have, and he'll buy/sell when he is quite certain that he'll profit from it. He is not a daytrader, and is not personally "against" anyone. He will however use different techniques to try to hide the fact that there is a large buyer/seller. Otherwise if we all knew the stocks on the NYSE would become a lot more volatile. DeeMan
LelandC, Sorry I didn't follow this thread lately: Here is what I see: If you trade small size (500 - 1k), you may see trades get filled around you a lot, but if you trade some size (>2k), your chance to get filled on arca is better, again, it also depends on the price of the stock (5$ stocks and 40$ stocks are different... cuz 1k of 40$ stock is a ok size ) DeeMan, well said. GATrader, On your scenario#1, when he shows size on offer, the chances are, he's buying on the bid if he's the only bid at that level - use print to confirm this (cuz he probably has a buy limit order above it that he doesn't show for 2 min), but if he got hit on bid couple of times, he'd drop the bid (why not)to buy lower then, sell them to the buyer. Here is what I do: Once I think stock bottomed (like DeeMan said, the mkt, the trend etc), I bid with him WHEN HE SHOWS A SIZE OFFER. and I think the size offer is just "flashing" (the only reason he shows size on offer, is to make stock look weak)...this is just oppsite from NAZ where you see trades go off on bid, stocks look weak... Good Luck