Market makers : The myth ??

Discussion in 'Trading' started by Digs, Feb 27, 2004.

  1. Digs


    I have read on the net that knowing how to read level 2 NASD, and seeing where the Market makers are you can get better trading results.

    I have no idea how one reads the level 2 screen, beyond checking liquidity and price spread.

    So do any of you specialise in analysing market makers with your trading setup. If so do you recommend a trader learning how to read the level 2 screen to there advantage ?

    They main point I am after is, CAN a trader read level 2 to ensure the market makers are on your side to drive the stock in your direction. Thus making this info vital in your trading setups ?

    thx in advance...

  2. no, but market makers can read you and other market makers via level 3 screens.

  3. You can't read MMs very often or accurately anymore on the LII screen due to multiple identities and them choosing to execute their trades through ECNs. You can, however, still gain much information from LII screens contrary to what seems to be popular belief here.


  4. I agree with Warren. I have been a Naz MM for 4 years now. It is possible to gather some information from the level two quotes if you understand how MM's operate and what capabilities they have. The problem is it's difficult to explain.

    With regard to wondering if someone will show their name in the quote window and make it obvious that they are driving the stock, that does still happen but more often it is easier to detect someone holding a stock at one level while others trade against them.

    Either way most MM's prefer to use multiple ECN's now for anonymity.
  5. BSAM



    It's: "Life is what happens to you while you're busy making other plans." We have to get these John Lennon things exactly correct, ya know!:)

    Otherwise.....I tend to agree with Ed Zeppelli's first sentence concerning the use of ECNs.

    I think good / appropriate analysis (without trying to follow Level II) is a much better approach for most. Too much trickery happening on Level II.

    Hmmm.....Is "trickery" a word??:cool:
  6. shows big block volume done by a MM in a given name

    for a given month ... is the block done via ECN or via their

    LEVEL II id ?

    i.e. GSCO NBBO and a big print hits the tape ?
  7. Digs


    ..."often it is easier to detect someone holding a stock at one level while others trade against them."....

    So if there is a larger trader out there hold heaps of shares, when the stock retraces, with the hope of the trend continuation , then wouldnt it be good to realise that the MM hold its stop order at the max retracement level, so you can get with the knowledge that the main player did not get out there position ?

    So is that not good info from a MM to help your trade ?
  8. J-Law


    Worked at Nite in trade support a few years back.

    Reading Level 2's can be like reading tea leaves.

    Good for obvious stuff. Like as mentioned "Whose drivin a stock or protectin a level".

    But in really thick stuff (volume), don't waste ya time.
  9. J-Law


    Digs, if I have you right, like a specialist on the NY, buyin the shake outs/weak sisters on the retracements that translates into a gradual lift on the tape in a strong stock ???

  10. Can't this be done through neither and then reported back to the tape? (I have no idea) I have a friend who deals with block trades at UBS. I think they find large buyers through their institutional sales brokers, then report the trade to the tape later (30 seconds or a few minutes later -- can't remember the rule).

    Maybe I'm totally confused here (probably)...:confused:
    #10     Feb 28, 2004