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Strategies & Market Trends : Stock Attack -- A Complete Analysis
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To: Claud B who wrote (2335)7/10/1997 9:17:00 PM
From: Robert Graham   of 42787
 
I basically agree with you, Claud. But I want to make two points here. One is that the bid/ask sizes can be meaningful at times, but much of the time is not. Adjusting the bid/ask sizes even for a short span of time is one "tool" that the market maker uses in his "poker game" with others in the marketplace. In this case it is in the form of an advertizement to traders and other market makers. This can have its purpose. For instance, I have seen market makers on occassion up the ask size when they had some stock to unload. I suspect they beleived the market will in a relatively short period of time have no problem in picking it up at the current ask price. Also, like I mentioned before, the bid/ask sizes are important to SOES traders.

If any of you want to get some insight into some of the games market makers play, choose a thinly traded stock that has periods of activity through the day. Follow the stock through a couple days. I tried this on IFMX at the beginning of the year. A streaming quote system is preferrable here. This is where I discovered that the market makers iareplaying their games to minimize their risk and maximize their profits. This means that stock trading is not the straightforward and "innocent" activity by the market maker that is written up in books.

I could not resist to put in another two cents here on this topic! ;)

Bob Graham
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