Trading based purely off Nasdaq L2.

Discussion in 'Trading' started by momotrader, Apr 3, 2002.

  1. Well due to being the past manager/co- manger of Phoenix they know some of them in fact some of them were taught to me by guys in Phoenix. But others offices NO. We might share some ideas here and there but if the entire firm traded the exact same system it wouldn't work as well.

    #21     Apr 4, 2002
  2. I know people who make a nice living trading nyse stocks using L2. They are scalpers. They look for stocks that have a large ecn presence. They mostly trade news stories and large volume stocks. I've seen some nice money being made using level 2. So it is not impossible.
    #22     Apr 4, 2002
  3. RTharp,does Echo have any monthly volume minimums before they boot you out?
    #23     Apr 4, 2002
  4. tom_p


    #24     Apr 4, 2002
  5. I was wondering that too, then I figured out what he was talking about.
    #25     Apr 4, 2002
  6. Sorrt, I thought most people were talking about using l2 for trading nasdaq stocks only.
    #26     Apr 4, 2002
  7. to limitdown:

    The software I use, as DATTrader pointed out, is indeed based upon the original Watcher software. The entire platform is designed around momentum trading. We have your standard L2 windows w/ T&S, market scans, risers/fallers, position manager, futures/market ticker, *very* rudimentary line graphs (absolutely useless), and a few other basic options.

    The only notable way in which the Watcher-derived software packages differ from the RT3/Cybertrader/REDIPlus/etc type packages for L2 trading is the position manager. The position manager constantly scrolls by with information about market participants ticking in your box (with different filter levels -- every tick, only price changes + bid/offer joins, or only price changes). At my firm, we also have access to the complete INCA, REDI, MKXT, ISLD, and ARCA books, not vital, but a big help nonetheless.

    Another feature we have that's a *huge* help that I would probably find lacking were I to trade at another firm using another platform is that information for every trade order executed at our firm is broadcast to every trader. You'll receive time of execution, size, counter-party, and whether the stock was bought at the bid, sold at the offer, sold at the bid, or bought at the offer. Since our firm easily does 5-20% of the volume in some of the Nasdaq's more active stocks, there is a *lot* of useful information to be gathered.

    Since a lot of people pointed out that L2 trading requires reading "into" the box as opposed to simply staring at the box, you can imagine that the trade execution information is incredibly useful. With a platform that excludes this feature, such as RT3 or REDIPlus (probably why Don Bright finds that L2 trading is silly), you have to work a lot harder to figure out what's going on. Trading something like a CSCO, this information may not be as useful, because someone like GSCO, MSCO, FBCO, LEHM, etc may pay lots of offers and hit lots of bids when they're not even on the inside market. But in something a little less liquid like a TMPW or EXPE, being able to see MMs hit the bid or pay the offer when they're 50c from the inside market gives you a bit more information as to where the stock may be headed.
    #27     Apr 4, 2002
  8. I guess this was really the main purpose of my starting this thread...

    From most of the responses, it seems that most of you do high volume scalping. Are you scalping for pennies in stocks like SUNW, WCOM, etc, or are you scalping for larger gains in the 20c+ range in less liquid stocks?

    It seems that high volume scalping in stocks in extremely liquid stocks can only be supported by a fee structure where you're working as a prop trader and paying only ECN pass-throughs while getting less than full payouts. It seems to me (my firm included), that most Nasdaq daytrading firms push this high gross P&L/high volume style of trading.

    We do have a few traders at our firm, trading their own money, paying "full" customer ticket rates that box-trade less liquid stocks (less than 1 million volume), that are able to pull in 6-figures a year and average less than 50,000 shares volume a day. Obviously this is a completely different trading style that entails more selectivity and greater risk parameters, but this style also seems the style that would be most suited to trading *with* charts and news. Intraday position trading, as you will.

    How many of you trade *this* way and how do you incorporate tools other than L2 in your trading? I've been finding that the market stocks have a lot more "noise" in their intraday moves, while the less liquid smaller-cap stocks have a lot cleaner moves.
    They just seem easier to read, but obviously, trading larger size in these positions can be very risky (or very rewarding).
    #28     Apr 4, 2002
  9. mbg


    DatTrader -

    how do you like the pointdirex system overall? is it reliable? is the platform designed for scalping?

    i use IB now - not bad - but not great either. I find their Best execution route to work very well - faster than Arca thru terranova imo.

    Let me know your thoughts. thx
    #29     Apr 4, 2002
  10. Phoenix1


    Without getting back into a whole heated battle all over again... SPECTRE Level IV is currently available through at one cent per share. The main website for the product itself is I've seen a lot of stuff out there in my time and nothing quite compares to SL4 when analyzing stocks in real-time using Level 2 data. One feature alone -- its ability to automatically identify support and resistance trendlines on multiple time-frames and alert you in real-time to when the stocks are at or crossing over those trendlines -- is worth the $100/mo they're currently asking for it. Then, wait for it to confirm a reversal, breakdown, etc with its other signals and alerts, and BOOM. Of course, we could all sign up for TradeStation at $895 a month instead. There's still a free one week demo available for people to see it in action. Maybe Don will finally take a look at it and tell everyone what he thinks about it too. Just my two cents.
    #30     Apr 4, 2002