NASDAQ vs. NYSE Trading

Discussion in 'Order Execution' started by mummes, Feb 26, 2001.

  1. mummes


    Hello all,

    It seems like most traders here trade NASDAQ stocks. However, quite a few trading companies discourage NASDAQ trading and prefer that you soley trade NYSE stocks. I guess I want to know what the main differences are in trading one or the other. I would like to focus this topic on just daytrading consolidation patterns and intraday swings and not scalping. What should one consider when trading either? And why do you prefer the one over the other? I know that NASDAQ stocks tend to move more and that you have the added benefit of Level 2 quotes but there must be even more to it than that, right? Would you recommend one over the other for beginners or is it plainly preference?

    Thank you very much in adavance for any insights!

  2. HI Mummes

    NASDAQ allows you to see level 2. It's an open market place with many different market makers making a market. A free for all is a nice way of putting it. A lot of the Tech sector is located in the NASDAQ it tends to be a very volatile market (wild swings in both directions)

    The NYSE/AMEX is slightly different. A specialist is present. He controls all of the buys /sells. Matching them up or taking the trade if no orders are present. The disadvantage is we can't see his book. He knows where all of the orders are he can easily trade. There are plans to make his book open to the public though so this may soon change. NYSE/AMEX don't have the huge market swings.

    I know traders who trade mainly NYSE/AMEX and do very well, and I know traders who only trade NASDAQ that do quite well. Both can be done with some experience. It really depends on your preference and trading style what I would recommend

    Robert Tharp
  3. tntneo

    tntneo Moderator

    Robert explained it well.
    Because the volatility is less and the book is hidden for most, daytrading Nyse/Amex takes more knowledge and good infrastructure [and very low commissions].
    That's why I guess, private daytraders prefer Nasdaq. Of course you can be a very succesful private daytrader on Nyse too.
    Maybe an advantage is the lesser competition than on Nasdaq.

    Your trading style should specify what kind of risk [maximum loss] you can live with in relation with your reward.

    High volatility on one side, with smaller reward if your timeframe is more than one day on the Nasdaq.
    With lower volatility on the Nyse you want low commissions because slippage and commissions can kill your system.

    There is no best market. It depends on what you want to do, your capital, your broker, your experience, etc..
    I can only talk for myself, as a swing trader the Nyse is much more rewarding than the Nasdaq with lower risk at the moment. Last year I was trading the Nasdaq of course. In a bull market you can almost pick up anything and it goes up. Volatility was good then.
    Some love the Nasdaq on the downside now [even swing traders] but the play it bearish of course. My system works in both direction, but I am more confortable on the long side. So as long (!) as I can find a bull market [and there are several on the Nyse at the moment] I keep up swing trading long where my kind of action is.
  4. Gene


    tntneo: what book(s), if any would you recommend to a newbie to best learn swing trading?
  5. Dustin


    The Master Swing Trader by Allen S. Farley is supposed to be great. I haven't read it myself, but have heard many good things. It is supposed to be very in depth and technical though, so be prepared for a long read.
  6. Alan's book is really good - for those who like to apply chartpatterns as trading-signals.
    IMO, a reader should be already familiar with TA and should have a strong interest in interpreting chartpatterns, application of support & resistance, Fibonacci retracements etc.
    The book is very comprehensive and several basic as well as Alan's favourite patterns are explained in great detail but, you'll really have to work through the 430 + pages.
    It's not the type of "easy to read - get all information to become a top trader in 5 minutes " book.

    You can get a good imagination of Alan's trading style and his patterns as well as daily scan's for stocks showing many of his favourite and some basic patterns at his own website :

    Alan's website is a great source for education on swing-trading.

    Good Luck
  7. nyse is much better.. but you have to understand specialists. You can almost always tell how his "book" looks based on just how he's setting up. I think it's much easier on nyse. Especaially cause you have all the liquidity you need.. and you just go in and out at market
  8. That surprise rate cut a lot of traders were short during that huge upmove. When we started to rally we moved with a lot of force. A lot of traders couldn't get filled. Some shorts got heavily squeezed. The specialist is required to fill a market order within 2 minutes of recieving it. Nasdaq has no such rule.
    I prefer NYSE for a few reasons. THe big one is my commissions are lower on NYSE compared to Nasdaq

  9. One traders take on supermontage thusfar.


    A Short Life For SuperMontage

    by Brian Pears

    The closer one gets to a painting, the more it changes. One focuses on each individual sweep of the brush, admiring the artist’s choice of color and technique. The creator’s true mastery shines through. But getting close enough to see each component stroke obscures the logic of the whole. It’s the totality that turns deft technique into genius.
    Get very close to the Nasdaq market these days and you’ll see some true brilliance. Take SuperMontage. It’s well designed and has been well executed to this point. Its design addresses dozens of concerns raised by a variety of constituencies. It’s creative and competitive. It’s a quantum leap over SuperSOES and everything else that preceded it.

    Tons of Liquidity
    Look at ECNs. What’s not to like? Tons of liquidity. The latest in technology. Different bells and whistles that cater to different types of investors. Plenty of competitive pressures to ensure innovation. Anonymity and flexibility all in one place. A boon for sure. Finally, peer closely at penny spreads. They’ve given rise to Nasdaq agency brokerage. No longer do investors have to wonder how much a dealer made off their trade. I get at least one cold call each week from firms that have recently opened Nasdaq agency desks. Trading costs are difficult to calculate, but the explicitness of those costs has improved dramatically since we went to pennies.

    Now step back. The Nasdaq is clearly not a masterpiece. The building blocks, Intelligently designed individually, do not coalesce into a coherent whole. SuperMontage was designed to bring disparate liquidity sources together, but most ECNs opted out of it. Heck, the American Stock Exchange, still owned by the NASD, can’t be accessed through SuperMontage. Market makers, already impoverished by penny spreads, are now faced with the choice to either pay non-market maker participants a fee for their liquidity, or choose to pass by a potentially better execution to avoid those fees.

    Fragmentation as a Goal
    What a mess. Is this the best we can do? The nation’s second-largest stock market, hailed as the stock market of the future only two years ago, devolving into a place where investors aren’t guaranteed the best price. A place that has turned fragmentation into a goal. The market of the future has become the market of the special interest.

    I’m exaggerating because I’m angry. I look at Nasdaq market structure and wonder whom it benefits. Not my firm, that’s for sure. The number of liquidity sources to which I must have access has only increased. The potential for missing volume, for not being able to find the other side of a trade, directly increases with the number of liquidity pools.

    I don’t have a solution. I don’t have the knowledge or the scope to fix all this. Some have proposed a central limit order book, and while I’d like that as an investor, there isn’t a broker or ECN anywhere that would be in favor of a CLOB. That much centralization would destroy too many niches in a niche-dominated business.

    The Cycle of Quick Fixes
    But I know this: The solution will supersede SuperMontage. Someone, or a group of someones, must stop this cycle of quick fixes. The order handling rules fixed market maker collusion. Reg. ATS fixed the inaccessibility of electronic trading systems. Shrinking spreads and decimalization “fixed” profitability for many market makers.

    SuperMontage will bring all this fixing to a halt. Something’s got to give. Market makers might boycott Nasdaq. ECN volume might explode to the point that traditional market making becomes obsolete regardless. No matter what it looks like, I think this system’s days are numbered. Too many vested interests are too unhappy.

    Luckily for the NASD, a better model exists. In the alternative model, a strong leader guides innovation and expansion. The leader defends the model aggressively and lobbies for it politically. The membership is not disparate, and the niches that potentially threaten the franchise exist at the margin rather than at the market’s core. The market markets its history of success rather than its uncertain future.

    The NYSE Marketplace
    I’m not arguing that the Nasdaq adopt the NYSE’s structure. I’m not saying that the New York is a better market. The NYSE is superior in that its leadership is tenaciously committed to its promotion and growth. Love it or hate it, we all know exactly what the NYSE is and where it stands on market structure. It is that tenacity, that singleness of purpose that Nasdaq needs to guarantee its survival.
  10. the nyse is committed to dominance and monopolistic advantage. in exchange for this, they make a market whose effectiveness is pretty hard to argue with overall.

    the thing about monopolies is that they are simple, effective, but very expensive. the thing about deregulation is that it drives down direct costs, but service and quality can diminish overall, at least for a time. direct costs decrease, but indirect costs (ecn fees, software, fail-safing, etc.) mount. newer players, some incompetent, come and go as new approaches are tried.

    these markets are in flux.

    there is no free lunch, that's for sure.

    perhaps the nyse and naz could merge:D (I don't see the 'puke' icon).
    #10     Nov 24, 2002