I think you guys are just bitching about nothing. If you are scalping dimes, yes you get screwed. It happens. Who cares. Look at the bigger picture. I personally made $40,000 today trading a few listed stocks. I entered 5-25k market orders. My slippage was 5-25c at a time. On average, it was 15c on 10,000 shares. I gave the guy $1,500 on every trade I executed. It happens. It is acceptable. I deal with it. I like slippage. It makes me know I am right. Rather than complaining, learn to use the system to your advantage. The specialist does not have that much inventory. Throw size at him, and he will run. Penny him and make the spread. There are lots of ways to win.
"Hence, many market orders to buy can come in, and even though under normal laws of supply/demand, the price would move up (and these limit orders could be filled), the Specialist is pinning the price, so he can unload his stash ahead of these higher-priced limit orders." if he is selling his holdings why would he try to pin the ask to hold the price down? i dont get it. why wouldnt he let the price rise and get a better price?
i've never ever used a market order on an illiquid listed stock. frankly, i'd be too afraid of what would happen a la GE...on that stock it was less than a nickel, but on a thinner stock, i'd expect him to hold me for much more.
vhehn, If the Specialist posts a limit order, at the same price as other posted NYSE limit orders, he has to yield to those limit orders first before filling himself (you know that). If the Specialist "anticipates" a possible downdraft in the stock price (e.g., large floor broker order coming), he may want to take advantage of exiting his stash, and do what I mentioned above. If the price is going up, as you had asked, this is not a strategy that he would use at the time. Praetorian, I agree with you, in that we need to work within the system, no matter how imperfect it may be. And yes, there are ways to make money. Congrats on your $ 40K day - I could only wish for something like that. What I don't understand at all is this concept of "price improvement". You have market orders coming in - i.e., people knowingly and willing to buy/sell at the market price, and you are giving them a price improvement. Why is this happening, if these traders are willing to pay the market price in the first place ? AND, by price improving, very often you are "price disimproving" for the trader trading at a limit price. So, in summary, you are disimproving those who are price conscious, and you are price improving those who are not price conscious. I just don't get this philosophy at all........
You have it backwards. The majority of price improvements happen to limit orders...the market orders usually get taken advantage of.
Dustin, I beg to differ. I have (rarely) been price improved on Limit Orders (if it's 1 % of the time, it's a lot). I think the vast majority of market orders are price improved (according to NYSE website, I think it's on the order of 40% of the time......of course, to me, it seems like 75% of the time). How/why do you say that ????? Thanks !
I have to agree with praetorian2..if we choose to play in this playground, then just deal with the playground rules. I can't imagine trading and having to worry about a penny causing me angst. I am not a size trader at all, but I think if a penny is that important to your trading strategy you are trading to big a size or a non exsitent edge. If penny really mattered to my strategy I'd look to trade something that pit traded so I could be at the front of the line..but that would reqiure me to have a big monthly nut just for the priveledge...I'd rather trade from home and not worry about a penny personally.
I don't mind giving up the spread and then some. I swing a big stick and i need liquidity over price. I bet a lot of guys love me for sweeping their limit orders. When I am working small size, of course I use limit orders to get the best price to the penny and I get improvements all the time. In a fast market, I would rather know that I get fills than try and save a dime. Market orders do that for me. It is an issue of knowing your battlefield and then becomming the general.