Thin Volume

Discussion in 'Trading' started by bronks, Mar 27, 2002.

  1. bronks



    Thank you, a quick question if I may... Does the same hold true for NASDAQ stocks? And there is no automation involved? How about the strategy of an individual actually making a market? Will the specialist or MM mow him down? So many questions, such a small brain, please bear with me.

    Candle- you're incorrigible dude!:D
    #11     Mar 27, 2002
  2. DeeMan


    Some Market Makers that work for some of the larger firms do cover more than one stock. There's no need to have a specific person dedicated to making a market in a stock that trades 25,000 shares a day.

    As far as automation goes, it is not wise for a Market Maker to use any type of "mechanical" system on these low volume stocks (other than one that automatically makes a market outside the best bid/ask) because it would generally work against them. Market Makers work off of flow - institutional buy and sell orders - and if they are not working an order there would be no point in trying to get involved in the stock as they would have no advantage.

    An individual trying to make markets in either market will be out of his/her league IMO. He will not see any flow which is a very important edge that the Specialist and Market Makers have. He also better be well capitalized, but even that may not save him. It does seem appealing to see a 25 cent spread on a thin OTC stock and and try and make a market by pennying the bid & ask, but eventually, a real buyer/seller will come in and run you over with size. If a seller owns 500,000 shares of a stock that trades on average 25,000 shares a day and wants to unload it, that stock is going to go down no matter how good the chart looks or how great the fundamentals are. The Market Maker has a relationship with the institutional client and will know the situation. An individual trying to make a market on his own won't have a clue until it's too late...

    #12     Mar 27, 2002

  3. NASDAQ has many market makers not one. When there is an increase in order flow their will be an increase in the # of Market Makers in that security as there will be much more order flow

    Robert Tharp
    #13     Mar 27, 2002