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Strategies & Market Trends : Level II Trading -- Ignore unavailable to you. Want to Upgrade?

To: ExCane who wrote (141)	2/9/1998 10:04:00 PM
From: Jay Morrison	Read Replies (2) \| Respond to of 1086

<<There's a lot more to it than that, risk evaluation, intelligence, experience, testicles (estrogen?), information sources and systems, research, execution and a host of other things>> Alex, You are correct of course. Except intelligence. I think someone of average intelligence who is good with numbers could be a good day trader. The other items I would assume that any day trader already has. Info and systems are easily available and are often included in any setup out there. I still believe that the ability to maintain your focus and concentration is the most important aspect. The most brilliant guy with the best systems and strategy will still lose money unless he/she can keep it up for several hours per day, every day. <<There is also a difference between day trading and soes-scalping, maybe you were referring to scalping.>> Maybe so, there are many strategies for SOES. Some people think that all SOES means is watching MMs for price discrepancies and taking advantage of them. My view of a day trader (SOES or otherwise) is someone who watches the market for developing trends (intra-day) and follows them using level II info to aid in spotting when the nearterm movement is slowing or turning. I don't see how a daytrader (or scalper) could operate without level II information. It is a huge insight into the market. Some of the people, on this thread, trade based on technical analysis. While I think it is valid and works, I think that it is much more difficult than using level II and following the trend intra-day. The main point I would like to make is this. SOES traders are not trying to beat the market makers at their own game. SOES traders are playing a different game that happens to eat some of the market makers profits. They are watching the market for near term price movements. This might take away from the profits of market makers. I will detail this more in my next post. Jay

To: ExCane who wrote (141)	2/9/1998 10:23:00 PM
From: Jay Morrison	Respond to of 1086

What is the relation between market makers and SOES traders? Many people (here and elsewhere) are of the impression that market makers and SOES traders are mortal enemies and are chasing the same dollars at the expense of each other. I do not believe this is the case. Market makers make money by being at the bid and the ask all day long in a stock. You have all heard the term 'order flow'. You have all heard that market makers will buy 'order flow' from discount brokerages (Etrade, Waterhouse, etc) They buy this order flow so that they can make trades buying at the ask and selling at the bid. If the spread is 1/8 of a point, then the market makers are making $125 for every 1000 shares of 'order flow' they have. Wirehouses have their own order flow from their inhouse brokers. A market maker is perfectly content to have the market stay all day at 25 1/4 bid and 25 3/8 ask. As long as the volume is buying the ask and selling at the bid, they will make money all day long. A SOES trader is looking for stocks that are moving. The SOES trader and any other type of daytrader is looking for a stock that is moving, be it for any reason (news, earnings, etc) Using level II quotes (for a SOES trader), they can spot this trend developing and spot when it is ending. If you are quick and have the guts to pull the trigger, you can make money. But it takes a good eye and experience to follow this process. One must be able to watch a lot of numbers moving fast on the screen and understand what the entire picture means. Example to follow on next post.... Jay