There was a story in WSJ about smaller average order size on the exchanges. Now the average size is under 800 shares down from 1500 shares last year. I understand from people who were daytrading during 1998-2000, that institutions would throw in crazy orders all the time like buy or sell 25k or 50k shares at mkt. Creating opportunity for the nimble day trader to jump ahead or fade the conclusion of the order flow. Over the last couple years they got smarter and instead of placing an order for 25k shares, they would break their order into 5 orders of 5k shares. Now this year you don't even see the 5k share orders as often. Now the big boys who want to buy 70k shares will use automated order entry to send in 100 orders of 700 shares each through out the day. This has made it tough to day trade stocks. There really isn't much money to be made off of the "other guys'" slippage. No free money. The resuslt of this is that stocks are less volatile intra-day. I see little size pukeout at the conclusion of moves. Trading seems more mechanical than ever. 10-minute ranges are very very small during most of the day. There are far far fewer size limit orders on the specialist book. A typical strategy that used to work would be to buy a stock as a large offer that had been there for awhile began to get taken out. If the mkt/sector/stock was in an uptrend, you would be fairly confident that as soon as the large offer was gone the stock would jump up 15-20 cents. You would have gotten in at a good price. This game seems all but gone. The smaller order sizes means that the game of buying the stepping down short seller isn't really relevant much either. How many 10k+ short sellers do you see these days. I think the folks who used to day trade 5k blocks basically quit. Cuz i don't see their orders anymore. So basically now day trading is about determining where a stock will be down the road (later in the day). Slippage and fills seem as bad as ever. So your predictive skills and market calls better be good or you will churn and burn. One positive thing about the program trading that people are using is that some stocks are trending well during the day. Alot of times it pays to just sit in the slow moving stuff as long as possible. It just keeps drifting. But then other times the drift reverses out of know where and then what do you do. I would be very interested to hear how other day traders are adjusting to this and what has been working for them. My ideas are to make far fewer trades. If there were 10 opportunites during the day, maybe there now are only 5. So don't feel like you have to make 10 trades.
As I understand it, Silk, your bread and butter strategies are not working as well as they did in the past. Are you beginning to consider trading other instruments (futures, nasdaq stocks) and adopt different strategies? Changes are often easier to spot than to adopt to.
Silk, I agree with you. I trade pairs and there's a lot more trending these days than there used to be. I used to sit and wait for big prints either up or down (basically a free lunch), but they are much more rare now. I have to scale in and out of positions.