Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Tim Lumley who wrote (3379)	7/16/1998 7:17:00 AM
From: steve goldman	Read Replies (3) \| Respond to of 4969

Tim, Concerned about a mm picking off the stop? Here's how itmight work. You do biz with E-Broker (whatever, whichever firm). You enter "sell 2000 ABCD 10 stop". First off, you can always put a stop limit on the order but that defeats the purpose of a stop to some degree. Anyway you slice it that order to be best handled should be given to a market maker. I dont think you are going to get a great price no matter how you do it because you are slamming a market order into a falling market. The issue is that the market maker has it on its books, they see the order, as the market is falling getting close. It really is irrelevant whether YOUR firm is a market maker (lets say you do biz with GSCO, DLJ, OPCO) or you route the stop to a mm. They arent doing you any favors. If you were that mm and had a stop order to sell 2k abcd at 10 and you saw the 10 1/8 bids stepping away, would you sit there at 10, if you were the sole mm at 10? No, you'd step away and it'd be 9 7/8 right after the 10 1/8 bid and you'd gethe stock at 9 7/8 or lower with the 10 stop. It might not be legal, but lets say the mm sees the 1/8th bids stepping away, he knows the 2k stop at 10 on his books, so he sells out the stock at 10 1/8. HE SMACKS THE BID...not your stock, but his own, perhaps short out of inventory. The waits for 2k left at 1/8, then takes out the whole bid. Now he's short at 1/8th. 10 bid is next best, the 10 bid activates your stop, he takes in your stock at 10 or applies the procedure in paragraph above and takes in at 1/4. Unfortunately, when you deal with the Nasdaq, its there game, play by there rules. Their philosophy is...if you think you can do better or it should be better, become a market maker or develop you own exchange. Unfortunately, again, since it is there market, you cant be protected that it doesnt fall to 9 and you got nothing off ifyou dont put it on their book. From a tactical standpoint, I try to avoid whole digits by 3/16 atleast. If I wanted a stop at 10, i might not go any lower than 10 1/8, 10 3/16...why because most retail investors put stop at whole numbers..."if it fades below 10, screw it, get me out' kind of mentality. So at whole numbers, MM will step away hard since they know thats where alot of stops might be, unless they really want stock. Others argue that whole numbers are where support is so make it a 1/16 below. It would be great if someone could find some research or test case as to where the most effective stop is. Regards, Steve@yamner.com