Lets' leave futures for gamblers... Back to my point. Specialists used to make money and still make money by seen/feeling the flow (personally, I do have respect them and their knowledge). How can we see and interpret what those guys are doing? I'm sorry guys, but you cannot read the tape by looking at T&S window - you won't be able to differentiate between a buy or sell trade!!!
I can figure it out even though eSignal cannot, and when I can't distinguish between a trade being on the bid or offer (which happens very rarely). I make at least 70 trades a day and that hasn't happened more than two or three times in the last few weeks - by "that" I mean watching the tape and not knowing if liquidity is being taken or added in a spot where it's crucial to know. I can buy or sell 100 shares to see where I get printed to test for hidden liquidity if it's necessary, which it rarely is, and if I really must find out if the tape is green or red, it's not because I can't piece together the quote and print feed since I remember every movement of every price level on every book - it's because people are being sneaky withi hidden orders, or putting in algos that will sit at a price level and automatically sell at any any bid that comes in, even though it's effectively an offer being hit, the prints would be red. But I might know when it's effectively a green print since people put in bids knowing they'll get filled, and they want to test the reserve of the seller's willingness to leave his algo on to smack all bids. Watching this is tape reading. When there's a buyer in a stock and there's momentum and I see how people will get squeezed and can react first and take an offer in that sweet spot and trade the position well. When I read the tape, I can find the confidence that the stock has a buyer because I can feel the buyer, and even if I'm wrong my risk can be minimized because I am able to accurately estimate what kind of slippage I will suffer if I am wrong before getting into the trade - knowing what my realistic risk and reward are at a given point in time, knowing how likely it is that I am right on a trade, and knowing when I don't know anything and have no edge and hus I should stay out, as well as when I should size in because the reward might be worth it and I need to take all the precious liquidity I can. So tape reading isn't lost and just because you can't figure out if a trade is on the bid or offer even though there is a constant lag between the print and quote feeds(if you peace things together it makes sense unless thest stock is cluttered with useless noise, in which case tape reading will be much more difficult and you should find something else...) - if there is a buyer or a seller in a stock who is aggressively working his order the tape will always reveal high probability entries, it's up to each individual trader to be able to recognize the setups, not hesitate, and trade them in a disciplined dway. The discipline is much harder than actually reading the tape IMO.
I do apologize, but I have a single clue what you are talking about. Tell me how you test the stock and how you make a decision based on where it gets printed?
Okay: If I see a trade that's green but I didn't see the offer getting taken I will put in a buy limit order at that price. If I instantly get filled, I consider the print to be "on the offer" and know that there is a seller there - even an algo not showing his hand on the book - who will fill my orders, until he shows he is done at that price level. If I see white prints between the spread, on NMS or NYS, I can again put in an order for 100 shares and see if I get filled instantly or not. If I get filled instantly, usually it's better to go the other way. If I don't, vica-versa. Of course no one rule works all the time but.. tell me a situation where it's imperative to understand where a trade took place, and where the current data feeds don't allow it. What kind of setup are you talking about?
OK, a little exercise for you, tell me where the following print is the buyer (taking the offer) or the seller (hitting the bid), and describe how you see it (we are still talking about NYSE of course...): 50.10 x 50.11 1 x 1 50.09 x 50.10 1 x 1 1s50.10 50.09 x 50.09 1 x 1
With the information given, we have no way of knowing whether the Specialist was involved or not. The 1 x 1 signify that the book was closed for a second, which could be signalling a crossed order, with or without the Specialist. Another thing to remember, is that there are often "iceburg" type orders. These will display 500 shares, bur really be 5,000 share orders. This is done a lot more on ARCA, but even the electronic brokers can do that on the NYSE. We spend a lot of time with tape-reading, primarily to help newer people understand the Market Mechanics involved. Shares being traded can for so many reasons (option trades, SSF trades, baskets, Program trading from futures, etc.), that the direction of the stock is not always impacted. FWIW, Don
This chopping up into bite-size bits is fun Nope, specialist doesn't have to be on other side. However, by regulatory mandate, has to be IF there is no one on the other side. Aggression can be induced. Or shall we say, goosed? Size? You're not talking about size (except in your own sphere). Which is why I responded Statistics would suggest closer to 70%. But that's an average varied each day. He only wants to get involved in the context your'e referring to ..........to tweak his inventory posture stemming from unforeseen............eh...................flow. You're disregarding locals, who play their role too Transactions between member firms, most likely negotiated, do NOT have to appear on tape. Safe to assume size dwarfs anything you're referring to. Has nothing whatsoever to do with odd lots unless you're referring to 122, 347 shares. Since you want to dwell on the trivial, odd lots (in the context you're referring to), will fill FIRST. Comes in handy when one wants in (or out). Specialist "wants" to transact in round lots. Inventory. Clean book. Period. Well, BRK.A and a few others might be exceptions. In essence, the specialist has price objectives with thousands of transactions in between. Forest rather than trees.
This might be of interest, how the algo trading goes with Goldman Sachs execution. http://www.redi.com/forms/algo720.pdf Page 2 has a good flow chart, etc. Don