juggernaut Interesting article from 1997 at Forbes magazine about the Nasdaq apparently being tons worse than listed stocks. I don't think it's that bad nowadays. With decimals, the spreads seem to be a lot closer now than they were then. :eek:
Okay, I have a question for you listed traders. I have been trading MER and MWD a little bit for the last couple of days - in addition to my usual Nas stocks. I have made a little money, but it has been rather frustrating. One of the reasons I am trading them is because I want to become a little more familiar with how listed stocks trade. It has been a while since I traded a stock with .40 spread by the way! Anyway, this is my question: is the specialist under no obligation to show the best bid/offer? Several times I have put in a bid or offer in between the spread (which was .20 or more). I would not get filled, and it would not show up. Does the specialist just put whatever price he wants to use for the inside bid/ask? This seems pretty dirty to me. I guess you guys do just fine dealing with this, so I will too. But, it really irritates me right now. Thanks in advance for any explanations. PS What do you do when the spread is .40 and you can't split it?
There might be several reasons why he is not improving the market with your quotes. Maybe he has'nt gotten to them yet. If I remember correctly when I toured the NYSE floor and spoke with a specialist. He said that there is a queue and they can only see the 1st 30 orders. MER and MWD are busy stocks and during fast market conditions there simply might just be a lot of orders in the queue and can't see your order. Another reason might be he has a big order and is in the process of sweeping or cleaning it up. That is the best part.. The stock would be 100/100.30 50 x 50 you put in an order to buy 100.10, but he does'nt show your bid, in fact he drops is to 99.80 and prints 500000 shares there Guess what if you were included you would buy 99.80 instead of your 100.10 bid. That happens to me 2-5 times a day. Your problem is the reason why I stopped trading MER and MWD. They have a lot of participants. I trade stocks less than 4M per day in volume. Hope this helps.
Does this mean that you listed traders frequently put in a limit order and you get filled for less? Thanks ~EC
Definitely !!! Ex. If I am long a stock and it starts to tank, I submit a limit order to sell .20 cents below bid and often times unless I am REALLY wrong, I get filled above the current bid after about 5 -15 seconds of nail biting.
GATrader, Thanks for the reply, it helps my understanding. I did have some other orders slowly filled at better than my limit. A nice surprise, and probably what you are describing. However, I left the orders I described in the previous post alone for a couple of minutes though. Can the scenario you described take a number of minutes to play out?
MER and MWD are among the toughest brokers to trade, try GS if you want a large cap broker that is liquid and a little bit easier. The spread can be very big at "pivot" points. For example a stock hitting say 50 with size and finally he cleared all the sellers, futures breaks out, bam, he shows a BID/ASK spread of 40 cents with ASK at 50.40, chances are he won't print there next tick (unless the demand is really strong), but somewhere in between. In situations like that however unless I am really sure about the stock I won't chase it. For people already longing the stock, it is the best feeling in the world when a stock spreads it half a point, but for people who are short it is the slippage they have to pay. Yes, there can be a very long pause until the next tick, as a lot of buy orders probably queued up and the specialist is ready to blow all the stops, and then he decides where he will cross those orders. Don't worry about the time between each tick, where he fills you has nothing to do with how long your order has been in the queue, the most important factor is how many orders are before you. That said, on all but the busiest stocks at busiest times (usually some sort of news play), I get filled very quickly, and this includes GE, IBM, TYC, etc . . . It most definitely shouldn't take more than a minute. If you have Direct Plus with your broker and your order is under 1000 shares, always go limit on the offer or above the offer (when sell, hit the BID or say 10-20 cents below the BID), I have done it many times and noticed market orders can be much much slower than DP orders. Besides, say the spread is 40 cents but you think it looks really good but don't want to pay more than 15 cents spread, limit 15 cents above the BID, if you get filled, fine, if not, so what. This is critical at playing the open, as stocks can spread you half a point fills you at the top and comes right back in, limit your order and include maximum slippage yourself, don't be lazy. The only time I would use a market order is when I want to pare out some shares into strength, price improvements are very sweet, and if I get filled on an uptick with say 100 shares I am definitely holding on to rest of my position because I will know there is demand for the stock and I can probably get a better price. This also has a lot to do with where you set your stop. Say you are short and the market looks like it is going to rip, don't wait for the stock to print above 50, once he does that, he is going to trigger all the stops there and the chance for a big spread is very high, if you think you have already lost you should either get out immediately or put your stop at 50, as 50 is typically a very liquid tick and you will get out before it blows up in your face. Of course, the risk is that if the market is weak he can hit 50 with small size then sells-off or briefly prints above 50 (blow everyone's stop), and tanks it. So it is up to you to decide whether you want to get out early or take the chance of big spread damage. With MER/MWD however, they can go as high as 50.20 to MAKE SURE that you are out before they tank the stock, and if you think "oh it is just a squeeze" before you know it you already saw 50.50 . . . Tape reading is the key, DO NOT use a tight hard stop when you trade stocks like MER/MWD, they will blow it like no tommorrow, you have to have good discipline and just watch the tape. Seriously, there are much easier stocks than MER/MWD in XBD. I would only trade MER/MWD when the market has super momentum.
I think my horror story from last week is why I no longer trade nasdaq. Look at ther. I bought anticipating the breakout. It traded over a half million shares that day, so I figured I could move 9k shares pretty easilly. Then boom, next day, the liquidity dries up but my stop isn't hit so I hold. Next day, there are no bids. Nothing nowhere. I knocked the stock 2 pts to sell 9k shares. It cost me almost 15k in slippage to get out of a trade that had already cost me 4k (which was my assumed stop). I know that had it been listed, no matter how illiquid, there would have been a 5k bid at the halves, and 20k minimum at the whole number. My max slippage would have been probably 20-30c. Most likely I could have moved 15k with the same slippage. The only reason I took a half position was basically cause I knew there would be some slippage. I didn't know it would be 15k worth of slippage on a 9k position. I will never again do short term nasdaq trading. I had given it up a while ago, and came back just to loose 2 weeks of gains for no reason. If I play nas again, it will be 3 dollar stocks like I am used to.