Market Makers

Discussion in 'Trading' started by squirrel, Mar 3, 2001.

  1. squirrel


    I am just beginning , faithfully studying everything I can,, trying to put all this into perspective,,,,, I have basic perception in level II,,, and realize the power that you have at your fingertips,,,, basic knowledge in TA and FA...One thing I would like to know is what basic advantage does the market maker have over you..I downloaded the demo on tradecast....been making imaginary trades,,,and have read about how reading the main MM and following his moves can help you....Is your main opponent really the MM or other daytraders?? What (who)is the axe??? and in laymans terms,,,,how can you really identify him ??? And can you be more profitable by following his moves once established who he is???
  2. Well, there are a lot of questions there, but I'll try to answer some of them. First, the advantage the market makers have over individuals is first that they have the kind of money and volume to control the direction of a stock. The second is that they can camoflauge their trading by using ECN's as well as their MM ID, making it more difficult to identify their true intentions. The "axe" is the market maker who is controlling the price of a stock by constantly buying or selling, therefore keeping the price where they want it, or moving it in the direction they want.

    Your opponent is definitely NOT the MM's, it is other individual investors/traders. No individual can compete with a MM, they can crush you if they so choose. They are the "house" so to speak, and you don't want to bet against the house, you want to find out what side they're on and bet with them. These days, recognizing the axe can be a little more difficult because of the reasons I previously mentioned. However, if you follow the same stocks and watch them throughout the day, you will get a feel for who the axes are and how the stocks move. Once you recognize it, you are definitely better off trading the same side as them, assuming you haven't been "headfaked" or misled to the other side of the axe's true intentions.
  3. limbo


    Z--as I also begin to get whipped more and more(large volume scalps) it's my feeling that mms are more insidious than ever as profits for them dry up in other areas. Support/resistence in all forms seems at times to be none existent and constantly violated as they fight each other and
    shake us out in a big concerted effort. Manipulation is huge like that BS rally of march 1. What are your views please-much thanks
  4. Limbo,

    It's definitely a different atmosphere right now in the market, and certain strategies that work in particular market conditions can be ineffective in others. There is much whipsawing around, although the overall direction of things has been (and may still be) down. Being a swing trader, I have been been fortunate to have success by simply being short on a few hundred shares of JNPR for the past month and a half (I'm still not stopped out yet). However, strategies such as scalping can be tough, as you are correct that market makers are moving stocks differently with regards to intraday price movement than they did during the bull market. It is actually easier for them to screw with stocks now, as there are substantially less individuals daytrading against them as there was before. As always, a successful trader needs to adapt and adopt several types of trading strategies to fit the market conditions of the time. While this bear market continues, short side multi-day swing trades are working best for me, whereas during the bull market I was doing more intraday in and out trades, capturing a few points here and there. It is still possible to do that kind of intraday trading, but with the market so unstable, and now the growing chances that a bottom may soon be reached and bounce back up to come, it makes it tough to trust any intraday movement as far as direction.
  5. limbo


    Thanks Z for the valuable info. Yes I have noticed there is indeed less liquidity as I look to find an ecn to get out-so there is indeed less daytraders out there now. On most of my stopped out trades as of the past few sessions-had I shorted this stock as the day begins and covered at the end of the session I would have made $. I like what you have to say here.
  6. limbo


    Zboy I'm impressed by your stock talk and now I'm even more impressed by your music and I'm a tough critic-I've had some experience in the past--I don't know if you have a deal yet but you will. Good luck.
  7. Limbo

    I'd like to add a little more to Zboy's comments. He is right. This is a very unusual market. We have wild swings and no real conviction. I've cut back my risk/size considerablely lately due to the huge swings. It's one mutual fund selling and instead of everyone following him they fade the fund's move. We seem stuck in a small range. The volume is pretty low indicating most traders are sitting on the sidelines. Sooner or later something will happen that will drive the markets higher for now it looks like more whipsawing. We are pretty oversold at the moment on a daily chart. AMCC and a a few others have had negative news but have gone up. This means negative news has been priced into the stock already.

    wait for a golden opportunity

  8. limbo


    Thanks Robert I shall follow your advice. By the way, several times You've mention NLP-I'm pretty well versed in it-however not through, I believe, it's Bandler Grindler-but thru Tony Robbins-do you have faith in his method or do you feel its a bastardization of the process?
  9. I'm not super big on Tony Robbins. He has helped a few people but a lot of his work is show.
    Did you get my email?
  10. as for the axe, he runs the show. Since there is so much less liquidity, the axe can really move things. I've seen axes accumulate 200k+ shares before noon in a stock that only trade 800k in a day... then move it 4 pts on 10k shares, and then sell those 200k for 800k in profits. That's why it's vital to find out what the axe is doing. Sometimes, I have found that they use ecn's to mask their intentions, so if you see them on the bid, but you think that they're selling through the ecn, take 4k and try snet'ing them...
    see if they bite, if they do, then you know what direction they really want. If they won't take your shares, then they are selling, so get out fast, and get short.
    #10     Mar 4, 2001