If you are consistently trading Dell successfully, my hat is off to you and I'd appreciate hearing your technique for choosing entry points.
Rick,
I've been trading Dell sucessfully for the past 70 days. Here is my approach:
1. I use DBC Signal Online for realtime quotes. I don't have L2.
2. I use Fidelity Spartan for the trading part, and work with a broker who will stay on the phone with me for about 1 hour at a time.
3. Assume Dell is at 55. When I see a bid/ask of 55 to 55 1/16, along with heavy bid volume and ask volume no greater than 1000 (e.g., 50 x 10), and if this persists for a bit, and if time&sales looks good (even showing some trades above the ask) I will throw in a limit order at 55 1/16. It typically gets executed.
4. Perhaps 8 times out of 20, the bid/ask volume slips against me as soon as I am in, that is, it changes to 10 x 50. If it stays this way for a moment or two, I throw in a market order to sell (unless something else tells me to stay in, like a rocketing DOW or TICK or Futures). I'll typically be out at 55, a 1/16th loss. On 500 shares (my typical lot), that is a loss of $30. Commissions of $14 per round trip ($7 to buy, and $7 to sell), adds another $15 loss, for a total loss of $45. Multiplied by 8, that is a loss of $380.
5. However, 12 times out of 20, the bid/ask volume won't slip against me. It will stay at 50 x 10 and perhaps build. I'll hold while it does this. Let's say it holds for 3 ticks, that brings the bid/ask to 55 3/16 x 55 1/4. It then flips, and I'll throw in a market order to sell after a few moments, typically catching 3/16. That is a 1/8th gain. On 500 shares, that is $60. Less commissions of $15, leaves a gain of $45. Multiplied by 12, that is a gain of $540. Take away the losses, and that leaves a gain of about $160.
6. If I get lucky, Dell will keep moving to the upside without the bid/ask volume turning top-heavy. When this happens, I can make more money on the Dell trades. If I get unlucky, I'll have more busted trades where the bid/ask volume turns against me as soon as I'm in. But my system is to get out at market almost as soon as this happens, which does a very good job of limiting the loss on these trades to 1/16th.
7. Sometimes, after a few trades, it is obvious that Dell is rangebound or is just continuing to fall. When that happens, I of course back off and approach it again later (I'm not doing short trades, though I wish I could, a problem with Spartan).
8. I do the same with CSCO and INTC. Some days, of course, are losers. But on average after 70 days the system is doing okay. It doesn't make much money, but the annual return beats a money market fund.
9. I'll also do daily dumper day trades and day trades on fundamentally sound low-liquidity stocks. These can return much more than my routine of DELL/CSCO/INTC 1/16th trades, but they are not always available. The big caps are.
10. Requirements: (1) Extremely rapid fill information (Spartan live broker provides, Fox Express does NOT, I assume MBT etc. do), (2) ability to turn around in an instant, (3) a smart live broker who can execute fast and have the order ready (or your own ability to move fast on an MBT, CyberT system), (4) very current quotes with bid/ask information, time&sales information.
Gary Korn |
