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Strategies & Market Trends : Z Best Place to Talk Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Ron McKinnon who wrote (13779)	3/21/1998 9:58:00 PM
From: Steven Bowen	Read Replies (2) \| Respond to of 53068

Ron, appreciate your thoughts, and generally agree if it seems to good to be true, it is. That's why I asked. But let's talk the theory of what I was doing and see where it falls apart. If a stock is quoted 40 by 40 1/2; the best published bid to buy stock is 40, the best published offer to sell stock is 40 1/2. If I put a offer to buy in at 40 1/16, my offer to buy is now the best. They have two choices as I understand it; they can fill my buy at 40 1/16, or within 60 or 90 seconds, they have to publish my offer as the best bid and change the quote to 40 1/16 by 40 1/2. I tried several trades and this is what happens. The next person who wishes to sell stock will then sell to my 40 1/16 bid. I will get my fill, and generally the quote falls back to 40 by 40 1/2. The exact same thing happens then when I put the order to sell in at 40 7/16. My stock becomes the cheapest offered for sale, so they either fill me, or change the bid to 40 by 40 7/16, which is what they normally did. The next person who comes along and wants to buy gets my stock, since it is the cheapest offered for sale, and the quote goes back to 40 by 40 1/2. Legally, I think this is the way it has to happen on the NASDAQ. And it does seem too good to be true. The only problem I saw was it seems like the market makers start catching on to my game after a few scalps, so that when I put a bid to buy at 40 1/16, they'd raise their bid to 40 1/8. The upshot of it was that after I scalp a stock a couple of times, the crooked market makers who were making 1/2 point on the spread ended up narrowing their spread to an 1/8 or 1/4, hoping I'd go away I think. I guess then you move on to another stock with a large spread and try the same thing. Other than not paying attention and letting a quick move go against you, I really don't see how this can't work. And on the other hand, if while you are scalping that 3/8, the stock upticks an 1/8 or 1/4, your profit on a quick flip can become 1/2 or 5/8. I know, it still seems too good to be true. But the way I had it figured out that it was supposed to work was exactly the way it worked yesterday. Didn't seem to be any beginners luck to it, just seemed mostly mechanics.