Ok - we know one thing for sure - there is always a buyer and a seller for each T/S print, even if just Specialist inventory - If I am the seller, how could anyone possibly know if I'm selling it because I'm taking profits (or a stop loss) OR because I'm selling it short?* If I am the buyer, how could anyone possibly know whether I am buying to cover for a profit or loss or if I'm just buying it long?* For that matter if there is a "Computer Guided Sell Program" going off, how could anyone tell whether that big block trade is to sell short or close long position? And when all those prints are recorded en masse, who could possibly know that with any reasonable degree of certainty? (other than Specialist and my broker, that is)* If anyone can read that from the spread or the tape you should be so darn rich you wouldn't spend second of your life on ET. If I'm wrong I'll go out and short at the bottom to punish myself
I think you guys are missing the point of the topic. It is about spotting market orders over a limit order showing up on the bid or offer because a market order could potentially move the stock. The topic was not about deciding if the order was a short order or selling of a long position. The point was to figure out how to spot an order that will move the stock so he can make money on it.
It's pretty easy spotting shorts on listed stocks. They will always be a penny higher than the last trade/print. Once you see a big order come in to sell, all you have to do is hit the bid (if you have access to bullets) and see if the order comes down a penny higher than the bid you hit. If it does, it's a short. Same goes for a buy minus (opposite of a short). If you see a large buy order come in, take the offer and see if the bid steps up a penny below the last trade. I haven't seen many buy minuses in the time I've been trading. However, I do see a lot of shorts. Hope this helps.
Market shorts are easy to spot if you have access to the specialists open book which has been made available to the public since December. A large offer will suddenly show up then the quantity will be gradually taken and the offer price will also step down until the offer is completely filled.
I do not get it. First of all isn't OpenBook supposed to contain limit orders only - what makes you think that an order in the book is a market order. Second, why does it have to be large? What about small short orders? Third, what does it mean "An offer will show up suddenly?" Can it show up like slowly or what? Fourth, what reason do you have to believe that it is a short order as opposed to someone closing a long position?
bingo! emphasis on the "last trade/print" part. On the nasdaq you can hit higher bids without the required "print" so usually shorts are easier to get off because of the less stringent requirement. That is one of the reasons that the retail daytraders continue or atleast traditionally traded more nasdaq stocks. (less need for bullets).
IMHO, the only way to tell is by seeing the DYNAMIC PRICE ACTION as it developes, and feel is the only way to tell the real thing from the head fake. Trying to say that OpenBook this or penny above that is the way to tell is nonsense - and way too static an analysis [at least on big volume stocks - I suspect that OpenBook and the penny analysis is great on thinner issues...] On the long side it is also not obvious. I know traders that break up their market orders into 500 share lots say 30 or 40 of them, to enhance the illusion of a bottoming stock that was creamed that day on news. If enough daytraders do this on a stock, other daytraders will notice the pace pick up and will jump on the stock - this is obviously a game of cat and mouse of daytrader vs daytrader. I know that this is not the typical example, but on other occassions I have seen a stock take off on a few thousand shares, only to see .40c later blocks of 40k a few at a time - how the hell did the traders seeing this misserable number of shares know there was a buyer? Maybe this is Openbook? I have no idea how this is happening [take a look at T/S of CCR late in the day today, around 15:18 EST - notice the breakout on almost no volume, then look at the HUGE volume (by comparison to neighboring 1 minute bars) at 15:28 - Then look at the following price action, probably triggered by 1st Alert type filters where daytraders jumped in. It is almost as if the orders are being set up in this way to get the best average price while trying to screw the greatest number of daytraders on filters.] I don't know about you guys, but something about the NYSE has changed. On the slightest spoos mo pickup, the spread on the side against the spoos mo reacts INSTANTLY. It almost feels like if you are gonna trade these stocks, you might as well trade the ES or the NQ. Also, pairs that used to be multiday cointegrated are still multi day correlated, but they are no longer multiday cointegrated. It is almost as if the time of day has altering strategies all it's own now, and it is certainly not the one we had even two months ago... Perhaps it is time to start looking at thinner issues. nitro
I have had your same experiences. I started out a liquid NYSE trader and have added the thinner NYSE issues to my tool bag. The use of open book and a short filter I have developed can give a trader heads up on these types of situations. This strategy works best with the 600K to 2 Million NYSE stock. My filter is set to >600K and <2 Million. It scans the offers one penny above the last on two consecutive prints worth at least 6K on offer. Post the bullet and hit the bid. As the offers drop one penny above last, a market short in on. Watch for the floor guys taking that offer and use the direct plus to cover the position. The win/loss is about 7 out of 10 and average win is 13 cents. For the aggressive traders, reverse the entire position (buy 2 as many share as short) and you may be able to scalp the short squeeze and stops that are triggered on the way up. This is a 10 to 20 cent trade, but happens in short order and many times a day with this type of filter. Stocks that work in this manner are azo, igt, fdc, abc, lxk, and some thinner chip stocks. I have used the open book to add another short tool to the bag; Watch were the bids on the open book come in, if they are trying to take the offers with size orders and the specialist is giving them better fills(less than the offer) that sets up to be a decent sign that a seller is in the crowd and the specialist is shorting the stock to these buyers, or the floor guys are shorting these orders. If this is happening at the top of a nice leg up on the market and the issue has not participated with the market, this contra trade has high odds of becoming a big winner. I have found that these work well with the oil service companies.
Very interesting... The only problem I have experienced is the B/A spread on these kinds of plays. For the play to work, you have to give up the spread on no real mo [although I may have misinterpreted this part of the strategy - you may be capturing impeding mo with your filter] say .05c [I am being generous - most "thin" stocks have at least this much of a spread, although 600k is not "thin" to me - 250K shares a day max is my definition.] Then ontop of that, the move has to go your way another .13c. Then when you go to get out, in order to keep your .13, it has to go another .05 [or for what amounts to the same thing, you can try to buy on the bid and risk giving back the .10c] to cover the short...Tha'ts .13 + .05 + .05 for a .25c move that the stock needs to make in order to capture this play. The size of the spread therefore that you are giving up is .10 to make .13. Add to this commissions and bullet costs and it leaves very little room for error. I did notice that the list of stocks that you give are also well researched, another likelyhood in making this work.. I believe in your strategy and your use of technology to help you find an edge is impressive... nitro