where did the large orders go?

Discussion in 'Order Execution' started by silk, Sep 17, 2003.

  1. silk


    Anyone have an understanding as to why there are far fewer large orders in the specialists books than the past 2 years. Somehow volume is still pretty good by end of day. But all the prints are 100 to 2000 shares. Are these small orders arb trades that are bouncing back and forth? Or are institutions somehow breaking there orders into 500 share orders? Seems like they wised up. Are people simply not trading as much? I see alot more 300 share bids and offers than i used to. I used to see plenty of 5000 and 10000 bids and offers.

    I'm not talking so much about sp100 names but smaller stocks.

    Is this part of the reason why volatility dried up on most individual names? Or perhaps the orders dried up because the volatility dried up?

    I wouldn't think order size would be a function of volatility. But volatility definitely is a funciton of order size.

    Somebody out there smarter than myself tell me what happened. Not that we can do anything about it, but just want to understand what has happened.
  2. Tea


    My guess would be that everyone is working it harder - trying to squeeze that last bit of profit or reduce slippage (costs).

    I think its true with the entire economy. Thats why productivity is increasing but job growth is not.
  3. burnin



    the real volatility of the market is going to be this way for a long time. when decent vol. returns the specialist system will be gone and catching a turn in the market will be like getting a edge trading spy.

    Considering how low the volatility is with it being september AND the market pushing highs dosent bode well for the future. Forward interest rates look unchanged for at least a year meanwhile the NYSE may get dismantled to the hands of JPM, Goldmine, Morgan stanley and Merrill.

    If your used to making a grand take home per day, prepare to
    work 2x as hard. make no mistakes and be lucky to make 1/3 what your used to. This month people are getting whacked except for the smart ones who are taking the "A" trades only

    scalpers........RIP unless your damn careful..... If you want a trade idea...buy puts on anyone dependant on commission revenue from day traders
  4. Thank you for the compliment.
  5. TD80


    The answer is quite simple! ECNs!!!! ECNs are the bane of the NYSE and specialists. However you or your friendly MM has to break up the order a good bit to work the ECN's properly. Another related issue is the immense pickup in "VWAP Orders", where the institution/big boy demands to be filled in the max VWAP area, and thus the issue dances around that area in relatively small lots. The days of frequent block trades are at a crossroad! The old days of firms "shopping" blocks may be doomed due to ECN cost savings and liquidity boom.
  6. I forgot where I read this, but I remember reading the answer from an institutional money manager that they break up their orders so that they won't be front run by the specialist and everyone else. With less volatility they are not willing to pay any price on a stock if they don't have too. Instead of giving the specialist block orders of 20K shares to be pennyed and leaned on, they are chosing to break up the orders into smaller sizes diminishing the amount and size of limit orders resting on the specialist book.

    As a side note I would guess that institutions do not have to pay up or down to get their shares because it is not like the stocks are going to be up or down 10pts by the end of the day where paying up 40-50 cents to get into a trade seems reasonable.
  7. Yes, it sure seems it is over. Scalping NYSE stocks these days is like pulling teeth. I am making about 30 cents on the dollar I made last year. Also must mention last year was my first year daytrading. I really thought things would have picked up by now since it is mid September! Summer is supposed to be over but it feels like it is still August most days.

    We joke at work "things will get better" but the thing is I'm sure it will but I sure don't expect things to get as good as last year. If it does it will be short lived I'm afraid.

    Scalping is dead. I am trying new strategies and I know most people in my office are not making much money this year. No body is trading the volume they did last year and the office is hurting as a result. The last thing I would do right now is open a daytrading office. People are leaving the office and going remote and getting their commissions cut to survive. It looks like I will do that soon myself. I can't expect the rest of 2003 and 2004 to be like the last 6 months of 2002.

    To be successful in daytrading now it seems you must make fewer trades and really hold onto your winners for the big moves or else you will churn away any profits you make by trying to scalp for small moves. Also swing trading seems to be another way to make better money. I haven't started that just yet but will try it in the future. Low volatility = Bad Daytrading. It didn't take a genius to make big $ daytrading 3-4 years ago but it seems you need to be one now just to survive. I can't believe some of the people who are struggling worse than I am even bother to get up out of bed in the morning to trade. Might as well sleep in and watch The Price is Right and Dr Phil.

    I had my 2nd losing week of the year this past week. I am looking forward to a big down month coming soon. That is when I do my best work..... Hoping for a Red October! Didn't mean this to be such a negative post! I do love trading and feel fortunate that I'm surviving this year.

    One last thing. Anyone else having trouble holding on to their winners looking at the open book and letting that get you out of your trade prematurely? That has been my biggest problem regarding holding on to my winners.

  8. TD80


    I agree that volatility can be a big help for daytrading, especially for those with access to very limited amounts of capital. I do think however that the real problem for a trader such as yourself is liquidity, not volatility!

    I say this in regards to stocks available to trade with relatively high betas, but of course unlikely to have the volatility they once achieved. What you must do is increase size, you can augment volatility with position size, assuming that the liquidity is there. This makes alot fo traders nervous at first, because size can be a real psychological factor. However if you want to stay in the putting game (daytrading), then you gotta find the relatively high volatility stocks with huge liquidity and work them with large size.

    I assume you have access to large amounts of capital as a prop trader. On the contrary, if you're wanting to hit from the fairway (swing/positioning), I would suggest learning on stocks with moderatve volatility but still decent liquidity, and keep your size quite conservative.

    I personally still do mostly intra-day transactions, albeit fewer and not *quite* as profitable as bubble days, but I have not experienced the drastic drought that alot of people complain about.

  9. TD80,

    Absolutely right. Something I failed to mention but I've said that over and over "I can't take size anymore". At least not most days. I think that liquidity has been a big problem for sure. I trade my best when there is some thickness on the bids and/or offers so I can take size. 2 weeks ago there were a few days that felt like last year with some thick layered bids and I could take 800 shares at a time instead of 200 or 400. When I can take size 600 - 1000 for me and have only a risk of 5 cents or less and an upside of 20 - 80+ cents I feel I can trade my best. That is when you have those great risk/reward ratios setting up and you should take as much as you can!

    I find there are fewer big orders to lean on and much of the time when you do lean on them they get printed! Anyway thanks for the advice. It is a matter of finding new stocks to trade and I have looked for high betas stocks that have volume 400k-800k that I can read and feel the trade well. I haven't found anything I like yet but will continue searching. I have only traded NYSE stocks myself.

    TD80 do you trade NYSE stocks? Just curious if you're trading NYSES or NASDAQ stocks. I am considering looking at some NASDAQ stocks with daily ranges averaging well over a point and volumes above 1 mil shares.

  10. I solved this problem before it arose: I never got "open" book.
    #10     Sep 21, 2003