Two years after the Flash Crash - Spreads are Narrower and Liquidity deeper than ever before? Think again. http://premarketinfo.wordpress.com/...iquidity-deeper-than-ever-before-guess-again/
Markets especially NYSE QUOTE have always been illiquid on the open and getting worse because NYSE represents only 20% of total shares exchanged. The author of this article obviously is years behind in his technology as there are sophisticated entry and routing to other venues available to liquidate off the open vs. searching for liquidity on the NYSE.
So this guy routes reg NMS and sends market orders. Ugh.. Find a broker which sweeps limit orders across venues or build an algo which does that. Have broker accounts with sigma x, liquidnet. You will very easily get out of 500 shares on a penny or two from the last print. That you're not seeing the liquidty doesn't mean that it's not there. Liquidity is a nanosecond game. Again, a technology paradigm for discretionary guys who are stuck with mouse and click. This is the same thing that happened to the phone brokers back in the 90's.
The argument is that a retail trader (who often do use market orders) would have to pay a 37 spread if they did in fact use a market order. The point of the article is that spreads are definitely not tighter at certain times of the day. And if you think you can sell IBM at 203.44 when quote is 203.10 x 203.46, you are sorely mistaken. Your sell order would have the crap sub-pennied out of it. Algo or no algo.
sub-pennied out of 500 shares? Puleeeze... that size is a speck of dust. try using automated sweep & cancels or better yet, hire a trader to trade for you. We live in a world where people expect things to be served on a platter. Put up some $, develop a good execution algo. Edge costs $ and isn't free.
It's a complete bullshit. The spread on IBM is around 3 cents. Either he is looking at the wrong venue or deliberately provides wrong information.
First 5-10 minutes of the open represent the best trading opportunities. Around 9:40-9:45 is when the HFT's settle in and spread narrows. Of course HFT's don't add liquidity. Volume yes but not liquidity. The open is too volatile for most HFT strategies so they sit on the sideline till the dust settles. And IBM's spread is 10-20 cents the first cpl minutes at open. Then it narrows round 09:33.
Yes, for Pro Traders... not bloggers. On a normal open... I probably have 300-400 Automated orders out there... And do at least 50 trades in the first 5 minutes... Many of them freakish ez money auto-scalps that would never happen latter. You should be doing 10-15% of all your volume < 10:00... Or you are leaving a lot of money on the table.