NYSE Specialist Limitation Open Book

Discussion in 'Trading' started by warrenbuffet, Nov 8, 2005.

  1. Hi guys,

    I just started training at a company doing prorietary trading. Mostly we buy and sell based on the NYSE Open book (where it shows the bid and ask price as well as the amount of shares: bidsize, asksize.) and the box where it shows you all the orders being excuted or any of the order that are executed but not listed in the book.

    Now i know that the difference between the ask and bid size is called the Spread, but what can i tell from the spread exactly... if the spread is big (meaning the difference between the bid and ask is big) and when the spread is small (where the bid and ask prices are closer to each other.)


    Also, what would be the best way to utilize the openbook? I've heard of the term Uptake, DownTake, .... now i'm not completely sure, but i think an uptake is when the price of the ask is either 10,1 cent, or any small amount greater than the price of the previous price.... meaning the sellers want to sell eagerly, trying to make the price go down...... making it a great opportunity to pull a sell short move.... am i right?

    If anyone could explain how these 2 things work. i would greatly appreciate it.

    I really need to master these two tools: the openbook, and the box (where you see all the limit orders, and the ups and downs of the market.)
     
  2. citrus

    citrus

    it sounds as though the shop you're at hasn't given you much in the way of training after all. i'd caution you against taking too much from any answer that you recieve here - the type of question you asked is best answered through a lot of hard work and experience. a simple response:

    1) open book isn't the most trustworthy thing in the world. it doesn't paint a complete picture.

    2) tight spread is consistent with lower priced / less volatile stocks and times of day. wide spreads are the reverese.

    3) i didn't notice anything in your post that would suggest an opportunity to pursue a trade, but i strongly encourage you to find out on your own. as the founder of ibm said: the best way to increase your success rate is to increase your failure rate.
     
  3. i completely agree with you. right now i'm basically just doing simulations, but it's hard to predict the trend. and i dont know too much to look for... like the uptake and downtake. could you explain them to me a little bit?
     
  4. I cannot believe there are still shops out there preaching the outdated Open Book scalping. If they have not even mentioned the soon to be extinict tape reading, you are really in the wrong place.

    I suggest you go out there and learn a few other techniques cause that Open Book scalping game has been dead for almost 2 years. If the major order flow is going through SDOT which means it ends up showing up through Open Book, it is fragmented and requires skills similiar to tape reading in order to detect.
     
  5. Learn all you can about tape reading,
    then learn to compare the tape to the open book and you will see the true picture.
     
  6. Spxdes

    Spxdes

    Hydroblunt,
    Soon to be extinct tape reading??? It might get a little harder but completely gone? Can you please explain why you think that and what you base your trades on?
     
  7. Can anyone explain how to short sell a stock based on an uptake? And how could i spot an opportunity like this using the openbook and the box?
     
  8. Spxdes

    Spxdes

    Warrenbuffet,
    I think you should use the open book more as a reference and not as a way to find an entry. Focus more on the time and sales, the tape, and looking at how the specialist prints. Sometimes the bids and offers in the open book will be fake. There are guys in my firm that will try to put up fake bids (fids) and fake offers (foffers) just to try scare or tempt traders into doing stupid trades. Hope that helped a little.

    -spxdes
     
  9. Spxdes

    Spxdes

    warrenbuffet,

    When you see an offer on the tape that is always one cent above the last print, it is a short. If the bids start getting taken out and the stock prints lower, that offer must follow the last print or it is not a short. The idea is to get short in front of a short that is stepping down the price. In my opinion, it is the easiest way to make money because the short is easy to spot. One more thing, there is not uptick rule for SHO stocks so you wont see shorts in them.

    -spxdes
     
  10. i think i see what you're saying, i'm going to give an example below, could you take a look and let me know if i'm grasping the concept?

    ex.



    where V stands for down symbol
    ^ stands for up symbol

    bid price / ask price shares

    9.34am: NYSE V 80.49
    (now this print's price dropped because the guy who made the 80.51 ask price is trying to pull more people to drop the price. BUT why doesn't he increase it a lot more? is it because he is afraid if he raise it too high people wont follow his footstep ( since the direction of the price is goveron by how close the bid or ask price is to the current price), so by raising it just 1 cent higher, it is closer to the current price, therefore easier to influence the direction?

    9.32am: 80.40 NYSE 80.51 1x295
    9.31am: 80.40 NYSE 80.51 1x294

    9.30am: NYSE V 80.50 2300shares
    ^- this is the last print?
    and should this be an plus or down tick here? it shouldn't matter right? as long as the next ask price is higher than the printed price, then the transaction is said to have an uptick.?

    ============================

    Maybe you will have a better explaination at this? But is this the overal concept?
     
    #10     Nov 8, 2005