Hi Dan Celestino; Making the spread may not be
as easy as you suppose. Here is a good link.
pristine.com
(Thanks Skeeter Bug for the link.)
Occasionally you will see a stock in a total feeding
frenzy and you will be able to buy at the bid and sell
at the ask (or vice-versa) incredibly quickly. I once
did it with CFON 3 times in one minute. The secret
to surviving this is to get in on the "hard" side of the
trade. You will know that you are doing this correctly
if you are spending a lot more time waiting to get into
a trade than you are spending waiting to get out of a
trade. But feeding frenzies are exceedingly rare.
Amazingly enough, I had a profitable day with
DELL today. Also had some excitement the
other day. I must have pushed the wrong
button and ended up putting up an order to
buy 3825 shares of DELL at the ask on the
ISLD ECN. I got hit with 3500 shares. Managed
to work out the first 1600 shares at a teenie
profit, but lost on the others, ending up down
$125, and sweating... I usually play 200 shares,
as I consider myself a beginner who should
not be trusted with a larger position.
Commissions at the Seattle Block office are kind
of complicated, they depend on how you make
the trade. Of course they are computed on
each "ticket". A single trade on ISLD (also
known as Datek) can result in multiple "tickets".
This can get expensive. Typical commissions
on 1000 shares would be $15 each way,
or $30 round trip. The places that charge $25
each ticket are not going to let you make any
money scalping, for sure.
Basically I've got four ways of trading, with four different
commision structures. Each costs $.0125 per share,
plus extra charges. The extra charge are (from least
to most expensive):
SOES $.72 - used to get in fast at a retail cost, and to
screw market makers who are sleepy, but only if you
are quick enough to beat the other SOES guys. Good
for slow moving stocks when you are willing to pay
retail, as this is the cheapest commission.
SelectNet $2.00 - used to get out of/into some
non-SOES stocks. You can preference a particular
market maker, perhaps making it more likely he will
do business with you. The other day I sold a stock
that had a spread of 3/8 at 1/16th below the ask
by using SelectNet to preference a market maker
who wasn't even at the best bid. (I knew he had
been buying the stock all day long, and when he
pulled off of the bid, I figured he was just trying
to mess with everybody's mind. Sure enough,
10 minutes later he was back at the bid, and
presumably hitting the ask.)
ISLD) $3.34 This allows you to make a market,
but you can also hit limit orders placed by other
market makers, so you lose the spread. Since
we have a direct connection to the ISLD ECN,
this is the fastest way to guarantee getting into
and out of a trade. This is reasonably cheap
at 1000 shares, unless the order gets filled in
a bunch of little orders...
INCA, TNTO, BTRD) $2.00 plus an extra
$.0025 per share.
REDI) $2.00 plus an extra $.0075 per share.
These are ECNs like ISLD, but I can't place
visible limit orders, and these take longer to
get an execution on, IMHO.
In addition, I have to generate a pretty large
number of tickets per day or I get a "workstation
fee" added on.
As to how you choose to enter a trade or exit
it, it just depends on the situation. To get into
a break-out, you usually lose the spread. To
get out into strength, I usually make the spread,
as you have a better idea of where the resistance
is in level-2. To make a market, one typically
makes the spread going in, but might not going
out.
I find it pretty complicated, but it would be boring
to do it any way else, given that you are going to
sit there for 6.5 hours watching prices...
-- Carl |
