Question For Volume/liquidity Traders

Discussion in 'Trading' started by KRUSTYBUCKS, Sep 14, 2002.

  1. Just wondering how you make money? If you are trading for breakeven or pennies - do you hold a position if you catch a break on the futures going in your favor. Also how many stocks do you trade on average? What do you get on your rebates?
  2. Scalpa


    Trading for pennies may not sound like a lot, but when you do the math it amounts to lucrative amounts of money. Let's say you're swapping 50,000 shares of a sub $1.00 stock. Even if you make just half a cent (.005) on each share, you've just made $250 plus or minus any rebates or commissions. If you can do this several times a day, you make thousands.

    Now granted it's not exactly risk free. If you buy at the bid and are hit, you run the risk of having the stock go down. So then just to break even you'd have to sell at the ask and get hit, assuming the stock isn't tanking even more. This is why it's important to trade high volume stocks that aren't volatile. Volatility can be your worst enemy if you're caught in a downward movement. It's also important to only trade when the odds in your favor. I won't place a bid unless there is a large bid size at that price level listed for several ECNs and MMs. And of course, the reverse is also true: if you are moving shares at the ask and there's suddenly a rush of buying, you can often quickly cancel your order and wait for it to uptick, selling it at the new ask (1 cent higher). If you use this edge and know how to cut your losses before they get out of control, you're going to make consistent money even if the stock you're trading doesn't go up.

    Back in the days that Worldcom was trading on the Nasdaq, I was averaging over $15,000 a day believe it or not. It was insane. I was literally in tears the night Nasdaq announced it was delisting the company. I'm patiently waiting for the next Worldcom, but it could take a while. My guesses? JDSU and SUNW. All it takes is for one of these ultra active Nasdaq-traded techs to announce bankruptcy protection, another corporate scandal, etc.

    I myself only trade 1-2 stocks a day. Sometimes, if each is slow (usually during lunch hours), I'll trade both at the same time. But usually, I'll just concentrate one at a time.

    I think a huge key to this new wave of "liquidity trading" is finding the right broker. I average over 100 trades a day, so using a broker with little to no commissions is an absolute must for me. 100 trades a day is 20,000 a month. The difference between paying $10 commissions and $0 commissions is $200,000 vs $0! I like saving the $200,000 a month because I enjoy driving exotic cars! LOL. Oh and forget any of those brokers that charge per share. If I can't pay per ticket only, then I won't make any money.

    Speaking of brokers, anyone have any leads on good ones for liquidity traders? They come and go like there's no tomorrow, so maybe we can get some recommendations?