ellen you can open a mm account, it is very expensive but you can buy at the bid as long as you get someone to sell to you, another words when you see bid/ask, an mm could be buying for you at the bid.
i hear the commision is $45 plus a few cents for every share, only pays for a big position trader, my friend has an account like this with acap i believe i will get details and post.
another is the executioner i will post link executioner.com
just know executioner not for bb's
two interesting articles on becoming an mm for yourself
interesting read and no question is silly here
ask anything and someone will answer, if someone teases you i will report them to si bob for off topic character remarks
this thread is to learn not to fight? hopefully to make some money also.here is the article and the link
Pristine's Course in
Playing Market Maker
Introduction
On the Eve of Christmas in December of 1997, when all was quiet on Wall Street, and last minute shoppers were preoccupied with battling the mad late-day rush, Nasdaq market makers quietly agreed to pay $1 billion to settle a class action suite that investors brought against them. The charges were ugly. "Collusion," "gouging," "extortion," you name it. If it sounded like the charges were befit a two-bit mobster, they were in there. Yet, the world slept. It was no mistake that these financial "mobsters" decided to settle on the day before Christmas. The market makers, which included big names like Merrill Lynch, Bear Stearns, PaineWebber, and Morgan Stanley, were fully aware that this pre-holiday settlement would get lost in the shuffle. Simply put, they got caught, busted, reprimanded, punished. But nobody knew. And sadly, nobody cared. This is what they called justice. Yet surprisingly, "we" the traders are the ones called the bandits. Somehow, it's day traders who have managed to get the bum rap. But let's set the record straight here and now. Never have "we" been charged with colluding and gouging the American public. Not once has one of our kind ever been investigated and/or fined for price fixing, and unfair competition. If anything, it is traders who are solely responsible for ushering in this wonderfully new era. It is our daily battle on the front lines of this war we call trading that is saving the investment public tens of billions of dollars in narrowed bid/ask spreads. We are the market's daily liquidity. We are its crusaders, its liberators. Not its bandits. We give. It is the other side that takes, and we now have a billion dollars worth of proof that they do. Guilty! Guilty! Guilty! That's what they are, by their own admission. So guess who are the real bandits. I say one should never be ashamed of being a trader. In fact, being a trader can not only fulfill the slew of monetary desires long held by many, but it can also help satisfy a much higher need: the need to feel as though one has contributed, has given, has made a difference. That is what we are about, and that is what this new educational piece is about.
A New World with New Trading Opportunities
Below, I hope to educate you on how to take full advantage of the opportunities the "new" NASD rules have helped to create. Prior to August 1996, Nasdaq market makers were not required to give us access to their market. They were allowed to post our bids and offers (ask prices) whenever they felt like it, which was only when they made their full spread, of course. If we wanted to buy a stock between its wide bid/ask spread, the market maker would typically let our order sit off to the side, unknown and unadvertised. Why? Because that curtailed the huge profits he made on the spread. God forbid! Only if the entire market moved to our desired price would we get filled. Well, today, things are vastly different. Thanks to the new ruling, these same market makers (MM) are now forced to either fill or display our orders to all other MMs, if it improves the bid/ask spread. That is key. Through the use of ECNs, private electronic communications networks, we can now post our own prices on the Nasdaq, making it absolutely unnecessary for us to go "through" another MM. In this New World, sophisticated point and click order entry systems like The Executionerr now give the individual trader the same access, and therefore the same profit potential as the big boys. The only major difference between the individual and the professional market maker today is education (know-how) and financial depth (capital). We have dedicated ourselves to helping you take care of the former. It is your job to take care of the latter. So, without further delay, let's delve into this wonderful world of making markets in Nasdaq stocks. Keep in mind, it was once a world kept closed to us. Today, we are making it our mission to take this profitable world back by storm. There is a lot of money to be made. And you are going to learn just how to do it with Pristine's Course in Playing Market Maker.
Step 1: Defining the Strategy and the Rules
The strategy or technique of a market maker is quite simple, when you think about it. The MM simply sets out to buy a stock low, and sell it high, all within a matter of minutes, of course. Needless to say, it's the "minutes" part that creates much of the difficulty. If you are to become astute market makers, you must fully understand a few things before taking the plunge. First of all, the individual market maker (that's you) must sacrifice or do away with the notion of big profits. The first rule of thumb in market making is "Never succumb to greed, and always take the easy profit." The MM must consider himself like a sparrow. The sparrow, seeing a large piece of bread on the ground below, is content to fly down to take a small nibble and quickly fly away. Even when the landscape is clear, and no other hungry vultures are present, the sparrow will satisfy his hunger by repeatedly visiting the bread to take small bites. In short, the sparrow's method is simple: To bite and take flight. Then repeat. The MMs function is no different: To repeatedly grab a small piece of the bid/ask spread (bread) on stocks that really should already be trading at more reasonable spreads. Note that I didn't say that his job is to ride the stock for big profits. In the market maker game, our goal is not to ride profits (in most cases), but to "snatch" them. Get the difference? One must be willing to give up the more infrequent, bigger gains for those that are smaller but come by more regularly. This is how the sparrow gets his daily bread, and this his how the MM gets his daily spread. I haven't seen too many starving sparrows, neither have I seen too many hungry MMs. Secondly, the aspiring MM must recognize that not every stock is suitable for market making. One of the biggest (deadliest, I should say) errors made by many novice market makers is looking to the DELLs, INTCs and MSFTs of the world with which to sharpen their MM skills. Wrong! Not only are these three stocks bad choices, they are viscious traps. For the average trader, the above stocks should be avoided like the plague. "But Oliver, have you seen how well DELL has performed?" Of course I have, and if you want to position trade or invest in a stock like DELL, you can and should. But I have seen the above three stocks cause the financial death of more day traders than anything else I can think of. They are manned by the richest and most astute MMs in the world, and the competition in them is tight, fierce and unnerving. In short, the MMs in these stocks will eat most traders alive. They have deep enough pockets to move the issue 3/4 of a point to a dollar at will. And they typically operate in tandem, claiming their victims by the hour. "But Oliver, why not take them on? We are smart too!" Well, of course we are. But why don't we take our lesson from nature. The almighty cheetah is the fastest animal alive, right? Yet, when it sees a pack of deer running across the field, what does it do? It picks the lame or crippled one to go after, every single time. Interesting, right? Despite being able to catch any one of them at will, the cheetah always chooses the slowest, as his victim. We should be like the cheetah, too. Why pick a DELL, an INTC or a MSFT when there are plenty of other stocks manned by slower, dumber, and less astute MMs. Make sense? I hope so. I know that in The Old Testament, David beat Goliath. But in the market, Goliath always wins. So stay away from the Goliaths. You'll be better off leaving them alone. Trust me. Lastly, one must never go home with an open position. Now I know "never" is a long time and if you pressed me I could conjure up a few reasons why one might want to hold certain plays over night, but as a general rule of thumb for the market maker, I say always go home flat. "But what if I am holding a loss near the close?" Then your only mission in life at that moment would be to kill the trade, at almost any cost. In a game where 1/8s are singles and 1/2s are home runs, you do not want to deal with overnight risk. Other styles can. But with this style you are a MM, not a swing trader or investor. Now let's continue.
Step 2: Picking Your Stocks
Now that we know not to play with DELL, INTC or MSFT, the question that remains is, "Which stocks do we play in?" While the answer to this question is always changing and evolving, I will provide a list of stocks that currently provides market makers with very decent opportunities on a daily basis. But before I do, let's consider what makes up a good stock in which to make a market (buy and sell). This way, once the stocks below become obsolete, you will have some basis for knowing how to find others that qualify. First of all, you want stocks that typically trade with a bid/ask spread of 3/8 or better. For instance XYZ has a $40 bid and a $40 3/8 or higher offer (ask). Now remember, no stock always trades at the same bid/ask spread. Stocks are breathing mechanisms. At times they will trade at narrower spreads (inhale), and at other times they can and will trade at wider spreads (exhale). The key word here is "typically." We want stocks that typically or often trade with a spread of 3/8 or more. Secondly, we want stocks that trade comfortably over 50,000 shares per day. "But Oliver, 50,000 shares a day is nothing. Isn't it better to trade in high volume stocks?" Not necessarily, and the reason is directly related to why we avoid the DELLs, INTCs and MSFTs. One could not ask for more daily volume then these three stocks produce, but that is where the problem lies. Because they are so active, MM firms will tend to put their best and strongest traders on them. But we are cheetahs, remember? We want to avoid the strongest, and pick on the weaker more lame MMs. And where do you think they are? That's right. In the smaller more inactively traded stocks. Now, we don't want "nil" volume. Don't get me wrong. Going too far in the other direction is not good either. But anything "comfortably" over 50,000 shares a day should serve us well. Most stocks we will make a market in will trade in the 200,000 shares a day range. Thirdly we want to see some quality MMs dealing in the stocks. Now I know I told you that we don't want to compete with the best of the best. But that does not mean we don't want to deal with the firms that the best of the best work for. A stock that is not good enough to be bought and sold by the likes of a Goldman Sachs (GSCO), a First Boston (FBCO) or a Merrill Lynch (MLCO) is a stock not good enough for me. While none of these MMs are boy scouts, their presence does indicate a certain element of quality. They don't always have to be in there, but I do want to see them dealing in the stock from time to time. So there you have it: 1) 3/8 spread or better; 2) 50,000 plus shares a day and 3) Quality MM representation. That's it. Now you know how to qualify (pick) your stocks. For now, we have done some of the homework for you. The list of stocks below should serve as an excellent starting point for you.
here is article about level 2
Step1: Forming the Market Picture
In the example below, Microsoft Corp. (MSFT) last traded at $84 3/4 and has a bid of $84 3/4 and an ask of $84 13/16. This represents the best bid/ask price, and is designated by the color yellow. Now, the Level II quote screen, as seen on The Executionerr, allows us to see precisely how the bid and the ask is comprised. Several market makers (MM), those firms which make a market in the stock by actively buying and selling the shares each day for themselves and or from clients, are bidding or wanting to buy MSFT at $84 3/4. GSCO, which is the MM symbol for Goldman Sachs, one of the most powerful MMs, and therefore one of the most watched by active day traders, is bidding for 1000 shares at $84 3/4. HRZG (Hertzog) and MLCO (Merrill Lynch), two other big MMs, are each bidding for 1000 shares at $84 3/4 and LEHM (Lehman Bros.) is trying to get 600 shares at that price. What's quite interesting in this example is the fact that INCA, the designation for Instinet, an electronic market on which many large investors and institutions trade in order to hide their identity, has a bid in at $84 3/4 for a rather hefty 11,100 shares. This constitutes a total of 14,700 shares bid for MSFT at $84 3/4, as opposed to only 800 shares for sale (offered) by SBSH (Smith Barney) at the ask price of $84 13/16. Interesting, but more about this later. Now the Level II quote screen also enables us to see the displayed market directly outside the best bid/ask spread, which is designated by the color green. A total of 5,500 shares are being bid at $84 5/8, while only 4,500 shares are offered for sale by 5 MMs at the ask price of $84 7/8. Clearly, the displayed demand for MSFT is greater than the stated supply in both the 1st bid/ask level (yellow), and the second level (green).
you need to go to site to see pictures of level 2 |
