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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: The Perfect Hedge who wrote (2317)	1/18/1998 1:58:00 AM
From: Robert Graham	Read Replies (4) \| Respond to of 4969

Everyone is on this "manipulation" kick. It like once this has been distinguished by John or Jane investor, he (she) places on these glasses that starts seeing everything as manipulation material. There is certainly manipulation of options and stock. But where many people look, it probably is not to be found. This becomes the reason that people use in their heads why they did not get the price they felt that they "should have" obtained. However, there are traders still making money despite this "manipulation" that many claim to have overgrown the landscape of the stock market. I will give you an observation of mine. Show me a person who has their act together as far as trading stocks, and I will show you a person who is successful in different kinds of markets, including managing whatever manipulation is out there. No stock can be "held back", particularily an actively traded stock. An illiquid stock may be a different story, but it is not as simple as "holding back" the stock. What do you do in order to "hold back" a stock as a specialist or MM? Not accept trades on the stock? I do not think so. In the open outcry system that NYSE and AMEX uses, manipulation of this form except for the very illiquid stocks like some preferred stocks would be impossible. On NASDAQ, on a stock that is actively traded like INTC, manipulation like this is very, very unlikely. So I have a secret to safeguarding against manipulation in the marketplace: do not play the relatively illiquid stocks if you are concerned about manipulation, or trade exclusively on the listed exchanges. Also IMO the best the NASDAQ MMs can do to "manipulate" a stock is by altering the perception of the exhuberant trader to entice them into plunging their money in a stock which has been known to create runs over a period of a few days. Now if those traders were keeping their eyes open and watching that ticker, it would be unlikely they would be caught in such a scheme. IMO if they are not watching the ticker, they have no business at all trading in the markets anyway. So this would leave the MM with "scalping" the trader for a fraction of a point. This is where the active management of the fill of your order can help through order routing selected on the behalf of the user that Steve talks about. Matter of fact, using the tape I have been able to side run the MM successfully into giving me the price on my order that I have specified. But then I am not dealing in any 10,000 share orders anyway. I also always put in limit orders. I do this with illiquid markets and anytime I trade on NASDAQ. But then I do not day trade. Also your system needs to allow for slippage. What I am saying here is there are ways in dealing with market manipulation through intelligent trading strategies. My father deals in illiquid preferred stock thathe has to play games with the specialist over. He has even seen the stock trade through his price on the NYSE. He has developed ways to deal with this. For instance, he finds that instead of chasing the price of the stock, he places an "all or nothing" order in 1/4 point more than current the "ask". this works allot of the time. Another technique is to break up your order into smaller blocks that are more manageable with an illiquid stock. On NASDAQ, there is SOES which in a respect does the same thing. I think that is why I see periodically a series of 1,000 share orders come in and show up on the tape. I suggest reading a good book on how the stock market works, both the listed exchanges and NASDAQ and the options exchages. Most traders for some reason do not learn about the market that they place substantial monies in for some strange reason. If they knew allot more about the mechanics of the system, and had a luittle understanding of how people operate in how thwy can take advantage of a strategic position like that of specialist or MM, they would have a fair idea of what is possible and what is not possible. That is how I was able to figure out that the option MM needed to hedge. That is also how I figured out you cannot trust what is displayed by the NASDAQ MM, for it very much a pocker game with them. Both this and many more of my suspicions have been confirmed afterwards talking to brokers, traders, Steve here, and that NASDAQ MM that was here on this thread. This was not difficult for me to figure out. But I took the time to learn about some of the meachanics on what provides for the operation of market. I suggest it is in the best interest of all to learn how the market operates by reading a few books on the subject, and then harassing someone like Steve and other knowledgeable folks here liek I have done with questions that relate to what you have learned. I am not attempting to be obnoxious here. There is just allot of things to know about the market in order to intelligently trade. I think I still have much to learn in the life long learning process. In the market, those who help themselves will have a chance in succeeding. Those who cloak their market experiences with essentially a form of superstition is increasing the already significant odds against them from succeeding. And unless posed as a question like you have done here, the promotion of manipulation rumours which many do here at SI and elsewhere is "superstition" as far as it reflects on trading in the marketplace. Is there a "Most Verbose Award" here given out on SI? Oh, I think that award is for the most posts. ;) Silly me. Bob Graham