DeeMan, always like your posts. I just want to add a little more from my experience. Say stock going down for a while (From hours to couple of days), all of sudden, you see a block (100,000 shares or so depend on the volume of the stock) printed half point below the mkt, at this point, I am almost sure the specialist bought it (picture this, some institutional/hedge fund wanted to dump them, they called the floor and specialist looked at the book, not much selling left, so he would say: I can do it but with .5pt below the market)... what is his next move? sell those 100k at higher price! and here is getting interesting, he would put a mid size sell on the offer to test if there is any sellers left, if not, he's next step would be up the bid with mid-size (500+), wait for a while, then he'd show a bid with size (1-2k) and lift the offer make the stock looks strong, at this point, all the shorters see this and some quick hand will cover their short, stock start to moving up, and specialist would put up a bid with size (50k or more) to do what I call a "final push up" while at the mean time, he is at the offer to dump those 100k shares he bought .5pt below mkt to make a nice profit,(you will see trades go off from the offer). I will buy with him right after he bought the block and start to count the print for how many he sold (roughly like 1k, 2.5k...) once I see he is done with (or close at) selling those 100k, I will dump mine with a nice gain... so the key here is to look at the chart (I use 1-min candle, be it V or U bottom) and the tape (L2 on NYS) and the prints to decide the entry and the exit, it hard work and it takes time to get your tape reading/execution in line. btw, me and preatorian2 have been trading in ET room (http://clubs.yahoo.com/clubs/elitetradinginaction) for the last 6 month, I mainly trade the gaps on Naz in the open, and he's doing gnp, so stop by when you have time. we may pick up some plays from you. Good Luck
LoneHand: You bring up an excellent setup to look for in trading the NYSE stocks. The further away the large print is from the last trade price, the better the chance the Specialist participated on the print. Usually that signifies a "clean up" print, and indicates that the seller is done. But even if the seller has more to sell, he's probably done for the moment, and will have no problem watching the stock climb back to it's previous level. You're right about those shorts covering too. When they see that big discount print go up that's the time to jump ship (the risk/reward is just not high enough to stay in). The hardest part is reacting quickly enough to get stock before the others do. I'll try and stop by the ET room next week when my computers are functioning normally again... DeeMan
Mr. Deeman thanks for sharing your high volume work numbers and words............With a library full of books,still good to be reminded of the basics ,but mostly your work help which had not read before...........Wow..........Some of your pattern fragments reminded me of Jack Schwagers words-blessed thru the markets.................Wishing the best to you ,and your wife,family,helpful high volume numbers......................
First of all thanks to DEEMAN and others that have provided insight.I have been trading MOT and LU for about a year(have been trading for 5 years).I have some general questions about specilaist sending messages to the market via L2.Again any insight is appreciated. 1) what is the true meaning of the spec.flashing the #7.Is he being genuine or are his motives different from what he is showing or is he saying there is buying or shorting going on at that level. 2)What is the spec.implying when he drops his bid/ask way below/above the mkt for a few seconds.Is he saying he will take the stock to that level or is just a head fake?Freeze sellers or buyers? 3)what kind of buying power does a spec.have for his own inventory?Does it even matter? 4)nyse open book a good thing or bad thing for a spec.and traders?Who provides this data? thanks
Not quite sure what that is. I never used level 2 to look at listed stocks, and I don't know what #7 is/means. Maybe someone else can help out with that one. It could mean a number of things when a bid/ask disappears and then reappears much lower/higher. When the spread is typical for the particular stock you are watching, let's say 34.50 to 34.60, 2,500 x 1,000 and then you see it immediately go to 34.00 to 35.00 100 x 100, that usually means a big print is going to go up in a few seconds somewhere in the middle of that wide spread. All market orders will be executed at that price. If only one side drops out, it could be that whoever was at the best bid/ask just cancelled and there was nothing on the book at that moment. It then takes the specialist a few seconds to put in a decent bid/ask. It could also be the Specialist trying to "shake out" other traders by scaring them into thinking the market has no depth in that direction. Many times I'll just wait it out and a better bid/ask will come in. The Specialist has a lot of buying power, but as you figured out, it doesn't really matter to the daytrader. The "deeper pockets" allow the Specialist to outlast the wiggles in the stock by averaging into a position, and with the ability to see order flow can usually make a profit. But if a Specialist turns out to be wrong (it does happen from time to time) he will not just keep averaging into an eventual huge position. He will cut his losses as soon as he knows he is on the wrong side. Discipline is just as important to a Specialist as it is to any other trader. IMO Open Book is just another way for the exchange to make an extra buck. In theory, it sounds like a useful tool, but to whom does it really benefit? The institutions don't need it: they already know where the real size is by talking to the floor brokers and Specialist directly. Besides, their goal is not to make a quick 25 cents off order flow. It seems like it might be useful to a daytrader, until you realize that no institution is going to give a size order to the Specialist and have him put it on the book. So if anything, I believe that Open Book will more often than not lead a daytrader to make a wrong decision if he bases it on the info he gets from it (Not to mention that it's delayed info). And it won't do anything for the Specialist, unless he uses it to fake out other traders. Remember, if he's working a huge market order, he can put any part of that order on the book and then remove it, which makes Open Book a rather useless tool for a daytrader. Just my opinion though⦠DeeMan
my focus is minis, but this thread seems to have a lot of useful information (not to be misread as 'holy grail'). anyone with recent experiences to compare with DeeMan's insights? anyway, it's a good read. enjoy. take care - omni
I trade stocks, and I have noticed, Stocks don't move independently so if you are just focusing on the specialists actions, they may or not be actions depending on where the general market is. So if Dow is going up, regardless if the market maker is doing back flips 95% it'll go up if the stock is green, Thats just my opinion on things.
You must be very new to the game because what you have written here is very obviously a novices viewpoint. First off, the specialists trade the NYSE and market makers trade on the NASDAQ. Reading the specialist means learning to tape read and deciphering price action to help determine future price action. Just because the Dow is going up, by no means implies that 95% of the time stocks go up. IF that were the case, that edge would probably have come and gone. Havent you ever seen stocks flatline when the market is rallying or even start going down? If it were as easy as buying when the market is rallying, dont you think everyone would be rich? Think about....there is a TON more to it that what you have written here.
Steve, Oh yes I am new to the day trading game, but I would not depend on an individual specialists price movement to trade a stock. But thats probably not the point of the topic, so ignore my post I did find this thread to be extremely informative for the inner thoughts of a specalists btw