I was asked privately to write about micro TA in an article for a distribution fee. My answer was that micro TA is being developed here on this thread and it is free. Micro TA is based on market making, and each stock has a different market. The market could change daily pending changing lead market maker.
Each market maker has their own customers. That defines the market and the prices they can call. But the lead market maker having larger volume dominates the smaller market makers. Level2 reveals the changes of each market makers' offers, in bid, ask and spread. We will be studying the interpretation of spread and market makers' intentions. From their intentions we know their true conditions. The conditions are inventory and cash position related. That information predicts the next change of offers, new bid and ask.
However, if you do not trade level 2, and work with market orders in your brokerage, the bid and ask offers are generally, the last trade reported to the exchanges. Once the bull pan or clearing houses clears the transaction, you have a trade. You can not be a daytrader if you operate on this level. The commission, no matter how small, eats up profit each way. Most daytrading houses trade with the daytraders, one on one, without clearing house. Watch out, you are buying and selling naked trades, because at the end of the day no stock ever changed hands. If even market orders take a while to confirm then they had to clear through a clearing house. You are working with a legitimate brokerage.
Next time we will discuss the reading of the spread between bid and ask. |
