The problem of getting a fill from market makers makes profitability even more difficult. In fact, for the newbies out there, I will list some of the things with make profitability very difficult:
1) The SOES system is virtually worthless. You will not get a fill using the SOES system, unless the stock is poised for a quick reversal, which will make you out to be a sucker. I would strongly caution people to realize that the SOES system gives market makers the tools needed to take advantage of you.
2) The SelectNet system is also virtually worthless. See #1, above.
3) Market makers are now allowed to quote as little as 100 shares on a stock. It is extremely difficult to be profitable without sufficient liquidity to enable a daytrader to get in and out of 500 to 1000 shares at a time.
4) Market makers are allowed to keep their quote posted for up to 17 seconds after they fill a measely 100 share order, then they can back away from their quote without filling any additional orders. Note: This is after they have delayed the market for 17 seconds with their fictitious quote posted on Level II.
5) Commissions: Daytrading commissions of $15 to $25 per ticket add up fast. Assuming you only trade 10 round turns per day, you will generate $2000 per week in commissions. That is over $100,000 per year!
6) The Spread: Assuming you make 10 round turns per day, and give up an average of 1/16 of a point for the spread on each 1000 share trade, you will be losing over $3000 per week ($160,000+ per year).
7) ECN's: Many people believe that using ECN's are the only way to profitably daytrade. I will not argue with this. However, one challenge that this creates in that you may end up getting a fill for less than your full order. It can be frustrating, and loss creating, when you get filled for 58 shares out of 1000 ordered.
These factors and others make daytrading very difficult. It is much harder than non-daytraders would ever realize. If you are very fortunate, you will break even, or only lose a little, until you have gained the knowledge and experience to daytrade profitably. Recognize, however, that there is no guarantee that you will ever become profitable.
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