Reading the Specialist.

No, you should never depend on anything to be 100% correct 100% of the time, but proper tape reading of the specialists actions can greatly increase your odds of success. Believe me, if you are new to the game and trade NYSE stocks, it would be very wise to pay close attention to how the specialist is filling orders, how much he lets a stock squeeze, IF he even lets it squeeze etc.
You should not depend on the Dow or S&P solely to make a decision, just as you shouldnt depend solely on a chart setup. Proper trading takes into account many factors and usually requires quick and decisive action.

 

Steve,
Thats true, I will keep that in mind, I don't trade NYSE stocks but I may try it out later. I only have one monitor so its hard to monitor one chart already

 

Here is some more basic specialist inner thoughts in today's market:

"Is that a day trader market order? Time to make some money.

Is that a day trader limit order trying to cross the market to get out? Time to make some money.

Hmm it's kinda slow, no institutional & retail action, as usual. Let's play around with bids & offers. Oh some day traders got active. Time to make some money."

Watch how the specialists scalp day traders & chop them to death. Stay away from that. Even if you're right you will most likely lose money.
You have to watch for big enough positions being established where a real move can be made in which the day traders become less significant.
Also the Open Book holds a lot more power by the day. The ECNs as well. You gotta recognize where the real action is coming through, the floor or electronically. Sometimes it's a mix and in unison, sometimes it's a battle.
Don't forget about NX which can screw up the prints. You can see on the tape if it's an AUTO (NX order).

Best thing to do is to pick an active stock and just watch the tape for a few days. Play with 100 shares to test your skill.

 

Deeman, great informative post. Do you have anymore tips, common senarios regarding specialist behavior, or can you direct me to some good sites that explains it as coherent and simple as you do?

I have came across some information and was wondering if you can explain the motive/thoughts of the specialist behind it...

1. Show bid – prints the middle – never hits the bid – prints the offer – and the offer become bid = GO LONG

2. Shows offer – prints the middle – never prints the offer – prints the bid and the bid becomes the offer = GO SHORT

3. Prints the bid again and again and again but does not go away – prints the offer and offer becomes bid = GO LONG

4. Prints the offer again and again and again but does not go away – prints the bid and becomes the offer = GO SHORT

5. Clean up print – when the stock is selling off or rallying, an odd number large print usually represents the end of the buyer or seller, and a reverse move will take place.

6. Stock shows a very large offer and a very small bid. Even though the bid is hit, the bid does not go away. The offer starts to print and then the offer goes bid = GO LONG.

7. Stock shows a very large bid and a very small offer. Even though the bid is hit, the offer stays with the same small size. The bid starts to print and becomes the offer = GO SHORT.

 

ROFL

If you are as observant in trading as in studying then I am afraid you won't get very far.

Deeman posted a grand total of 52 posts and the last one was in 2002.....

You may be waiting a very long time for Deeman to give a reply....

 

very true, I did so a search before hand. I tried sending him an e-mail through the forums but it says he does not wish to receive e-mails, so I sent a private message to him and maybe he will be notified through e-mail. We'll see, I read his post about institutional thinking, specialist,and tape reading and I have to say that's the most logical, coherent, explanation I have came across, and I'd love to read more.

 

That makes sense, i'm going to try that. Bye bye indicators ...for now.

 

Wow, what an awesome post by DeeMan. Truly excellent stuff, although it may not help us now as tape reading is becoming extinct. Its because of great people like him that the world is still spinning. I hope he comes back and teach us how to survive under today's circumstances. God bless him.

 

Right, but what are you going to do when NYSE goes, from hybrid into fully automatic...try to read computer mind. Buddy, stick to the charts for now. Tape Reading is important but not as important as it was 5 years ago. Plus no offense to Deeman becouse I think he created one of the most educational posts on this blogg by far, but I think his Tape Reading got him in trouble during that little bubble that we had between 2001-2002. But i do thank DeeMan for that post it was very good.

http://topgunfinance.blogspot.com/

 

I defy you geeks to 'beat the machine'

It can be done but I haven't seen any evidence here that you are on the right track.