Hi, Carl!
Wow, thanks for that long and detailed reply!
<A serious trader will have at least 3 ways to get in or out of a trade quickly. Typically that would be (1) his primary trading account, (2) a phone he can use to call up the broker (which works even on market collapse days), and (3) a cell phone that is always working.>
Oops! Those are good suggestions. I have a single line for computing and calls, and voice mail, and no cell phone!
<His list of phone numbers to call should include more than just his broker. It should include the "main office" trading desk, and anything else.>
At Brown you don't have an individual broker. I've never experienced a phone delay over a few seconds.
<With that kind of redundancy, the more common problem is not knowing if you're in a trade, rather than being unable to execute one. (I.e. you try to make a trade, but before you get a confirmation, your computer link goes down. Ouch!)>
On Friday my link was OK. My streamers (not Brown) were both working. Brown was replying. $13.55 was reached at the close. But Brown kept saying I had no trades, until I went offline about 4:20.
Also I placed two limit buy orders on another stock. One was executed, as the price dropped rapidly 20c past my price; the other wasn't. I canceled it, and watched the price go up 40c over my price! Weird!
Normally I can place a limit order, see it immediately on the bid/ask (if it beats or equals the existing bid/ask) and watch the execution and get the trade, sometimes in less than a minute.
As AMD dropped 7 weeks ago, I placed limit orders to sell, and moved them down, without executions. I was too greedy. But my broker did fine.
<But it's not just margin rates and after hours trading. If I wanted to move around $500K worth of AMD I'd certainly want to have complete understanding as to how the order was being presented to the market.>
I'd like to know what the price will do in the next few days. That would relly be helpful!
<That kind of size is what an institution tends to move around. You need an institution type trading account.>
What's the difference?
<Either you've got one huge account, or you're putting way too much of your money in one basket, by the way.>
Yes. Diversification is good. I have multiple accounts (two main ones) and I invest in homebuilders and other areas.
<In any case, the market should be treated a bit as a poker game, you don't want to show your cards to everybody.>
Yes. In stocks traded less actively, I've seen my bids affect the bid/ask range.
<I don't know if you are aware of how Brown is showing your order to the market.>
My understanding is that on the NYSE, traders can see only the best bids, but on NASDAQ they can see them all.
<If you just put out a limit order with size that big, you're going to move the market. Daytraders are going to use you as a back stop for short sales just under your limit price. That is, if you're selling at $16.00, they'll put short sell orders at $15.99. If the stock drops, they make a profit, and if your shares start to get eaten up, they turn around and reverse by buying your shares. What you've done is provide them an almost riskless way to enter the trade.>
Yes. I've seen it done. I've done it.
<AMD did 3.5 million shares Friday, according to SI. Over a 6.5 hour day, that's about 9000 shares per minute. Your order was about 4 minutes volume.>
10 minutes! I didn't get it all!
<The guys who are trading against you can turn around a trade in about 2 seconds.>
I'd like to be able to do that.
<Any scalper would take advantage of that kind of size in this kind of a market. If you did the same thing in a stock that was more lightly traded, the tendency of scalpers and daytraders to take advantage of you will increase accordingly.>
So I don't day-trade thinly-traded stocks, or place orders larger than 5k shares.
Every trade has a greedy investor on both sides, and only one is right!
<I think you need an account that lets you see ISLD, ARCA and INCA book,>
Explain, please, Carl!
<saving 6 cents per share on better execution is a couple thousand dollars.>
I try!
<I don't know if Brown will let you place orders with something like "best efforts" specified. Maybe they have something like that.>
They have a site, "Execution Practices at Brown & Company".
Try
brownco.com
<As far as margin rates go, a decent broker will let you short stocks with no need to pay margin interest. The margin rates that Brown charges for borrowing to go long seem reasonable, my question would be what they charge you (if anything) for going short.>
Yes. I grudge that interest. Are you a broker? Are you soliciting my business? PM me!
<That can only mean one thing - they're selling your order flow. In other words, they're making money off of your orders that doesn't show up in the commissions. Essentially, they get a kick back by giving your bad prices to a market maker. Here's what the SEC says about "payment for order flow":
sec.gov
Also read:
sec.gov;
Thanks for the addresses!
<Now I don't know for sure that Brown receives payment for order flow, but that is the only explanation I know for their charging a different commission on limit and market orders. Market orders are more easily taken advantage of, and that's why they give you a lower commission on them. But (large) limit orders can also be taken advantage of. You really don't want your order flow sold, I think. This is something that should be showing up either in your account agreement or in your tickets.>
Yes they do get paid. And they acknowledge it. And they are paid for limit orders too. And they can direct orders to obscure markets.
<On the other hand, if you really just don't care about the last few pennies per share, you should keep Brown.>
I care, desperately!
<I would guess that trading AMD after hours is a really bad move, due to the wide spreads involved. In fact, I would avoid after hours trading completely, except when events force you into it.>
I agree. I've noticed the low volumes and I've read the warnings.
Thanks again, Carl, for the detailed reply! |
