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Strategies & Market Trends : Analysis Class for Beginners
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To: Arthur Tang who wrote (706)2/7/1998 11:18:00 AM
From: Arthur Tang  Read Replies (1) of 1471
 
Classic market making revisited. Market making starts with underwriters distribute the stock in round lot to good customer. The concept of the distribution is to be able to maintain a steady market. Quick turn around is not possible, because to profit in a round lot is not tempting enough. This, also speaks well of the fact that investors buying the distribution are strong hands. Many market makers are proud of themselves doing the market making correctly for their company.

Looking at the market today, daytraders went in and out of stocks trying to scalp the market makers, who depend on making a few bucks to stay in business. So, the stock has a problem with maintaining a reasonable P/E ratio, for any serious investors. Daytraders in turn loses, because market makers are very nimble to protect themselves. Every investor can see the action in 1 minute interval intraday charts; market makers pitted against the daytraders. Long term investors are on the side line, looking at the huge volume turned over.

So, to have good investment, stay with the wall flowers. Check the distribution (how many stockholders does the company have). Some times less than 750 stockholders can have a wonderful investment. No volitility. On the other hand, very large numbers of stockholders who are daytraders is not your cup of tea, as a long term investor. 1 minute interval intraday trading chart can tell you also how many day traders are involved.
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