Market chat

[payneg01]

Hi Naz
I really enjoyed the CD. It has certainly got me thinking how I can use Level 2, as I am a pure chartist (swing trader, not day trader in U.K. stocks at the moment ). I really must stop speed reading as I did'nt realise you had an input.

Many thanks
Greg

 

[Naz]

Hi Greg

Even swing traders have to enter and exit their positions at some stage.Level 2 direct access is not just for scalpers and day traders,it helps all types of traders time entries and exits much better.

A swing trader for example may just be interested in it when his chart tells him there is support or resistance.He may then just use it in its very basic sense to view exactly how the players are treating that level.This extra information can help his trading decisions improve.He/she may then become more adept at using it as time goes on and use more of its functionality.It is not just there for scalpers,its for everyone.US brokers pushed it so much towards using it for scalping and that it seems to have frightened more longer term traders off.Which in my view is a pity.

I am of course talking about Nasdaq level 2 and not the more antiquated UK version.

 

[options]

Naz,
Is there anywhere we can view demo's of Nasdaq L2,
and trust us to have old L2's. Always the way here in the U.K.
Lag behind everyone else and get fobbed off with all the expensive rubbish.

John.

 

[Naz]

Hi Options

Maybe one of the viewers to the thread who is getting into it may know more about this than me.However from what i hear some of the new starters go to www.cybertrader.com and down load their demo system to play around with.

www.Ameritrade.com have decided that their internet traders can benefit from looking at a level 2 screen before taking their trades and offer it as an add on.Full details and a demo on that site.They also offer the upgrade to Ameritradepro if people get used to it and want to be able to add the direct access part to the whole set up.Once again new starters probably know more than me on this.So any input by any one else is welcome.

It is there to help traders.You can take the whole concept and make it as simple or as complex as you want.I think one of the biggest problems in understanding it is going to far to fast.It comes to you little by little.There are numerous books on the subject in the US,and dare i mention it courses like mine that teach it.

 

[ChartMan]

AIQ 6.1 , ( or maybe 7.0) which is in BETA and due to be released soon will have L2 as an option.....wether that will be itegrated with AIQ or will be "stand alone" is not clear.

 

[spoon102]

Verisign Trade

Hi Naz, Just reading about your trade on Verisign.

Friday was a real down day in the US. All indexes broke potential support (S&P 1080, NDX 1300, Dow 10,000). On a day like this I would prefer to short. Pick just about any stock and you would have made money! When I started trading Nasdaq I would look for stocks that were weak to buy and stocks that were strong to short. I learnt the hard way that this is totally the wrong thing to do. I now buy strong stocks on any weakness and short weak stocks on any strength. I can understand you going long on a morning gap down if MM's are lining up on the bid, but not mid-way through the day. I prefer to trade with the trend and Friday's trend was down. Just wondered why you did'nt trade on the short side on Friday?

 

[Naz]

Hi Spoon,

Yes i did wonder if anyone would say that.I'd already been short and done well.I also agree with buying strong stocks on weakness and short weak stocks on strenghth.However i've worked with two great Nasdaq traders who in certain instances look for slightly different trades and i was copying their ideas.

Here goes.Many times on a friday afternoon weak stocks that have sold off for a number of days can pick up when traders go long hoping that they've been oversold, regardless of what the overall market is doing.Especialy if they hold some kind of support level,ie a decade number.

If the momentum starts and is held up by the ax you can get a strong move into the close because there are no more sellers and as it snaps back, all the morning shorters start hurting and have to buy back their positions increasing the upward move.Also many traders are going long to hold over the weekend in the anticipation that the weekend US press comes out saying that in their opinion the stock has been oversold and is a true buying oppertunity.They hope this will create buying on Monday morning where they sell into strength.

It is a pure risk reward trade.My risk was 10c, reward was maybe 90c ie 9/1.It kept slowly wanting to do it all through lunch and when the ax came in to join the move that was the key to try it.Goldman also came in as well.They also started frightening people by using inca to load up with stock and this again is very positive.

I always trade what i see not what i think and i could see that they were strong buyers.However as soon as i saw the ax and Goldman give up i did as well and took 20c (or 2% profit)

Instead of showing something that worked to perfection the reason i posted the trade was to show that by using a level 2 screen with direct access even trades that dont work as planned can still come out with some kind of profit if you forget the intraday chart after entry and watch whats realy happening on the screen.

By the way i also saw another new Nasdaq trader double his account in three weeks by looking for this type of trade every day!
Once you see these guys do it.You make a mental note and every now and then if the set up happens i give it a go.As long as you can control the risk its worth trying.

I hope this helps.

 

[Naz]

By the way i've got the Nasdaq comp at a 62% fib retracement from the Sep 01 low to the Jan 02 high.Any t/a guys got any ideas for next week on the Nasdaq or any good looking set ups on Nasdaq stock charts that might be worth looking at?

Do you reckon we'll bounce or will we continue to fall?

 

[Mr. Charts]

I'm looking for a bounce with several good set ups, but as always will trade the market, not my opinion. We are clearly over sold, but could continue as sentiment seems to be increasingly doubtful about recovery and lack of increased earnings; not to mention failure of corporate governance and lack of transparency. From a trading point of view, I don't care just so long as I can continue to read what is actually happening in the market. I do have a slightly cynical view that this markew is being taken down prior to a bit of a buying spree, but trade the moves not the expectation.

 

[spoon102]

Markets

I agree with most of the comments by Mr Charts. The markets are starting to look oversold. I tend to use S&P Futures as a guide to the market. The futures traders drive the markets. The S&P futures are now nearly 100 points off of their recent highs. The pros might being looking to go long here at about 1070. However, if the markets do not bounce here, and we see 1050 on the S&P I then expect it to go sub 1000 before bouncing strongly.

 

[spoon102]

Nasdaq

Naz, Just had a closer look at the Nasdaq. If we bounce somewhere around here then we will have had an a-b-c correction from Jan to Apl. My opinion is to take everything 1 day at a time and trade the trend.

PS Alan Farley makes an interesting point on his site (www.hardrightedge.com) he states that the more common application of fib in TA means that the pro's are trading in the other direction at key fib levels (only to reverse after the 62% has been taken out). Just another example of how the market will always change to defeat the majority.

Spoon

 

[TraderPattern]

Naz,

Have you experimented with NYSE stocks? .... a potentially overlooked goldmine... or not?

TP

 

[Naz]

Hi trader Pattern,

I do swing NYSE stocks.Mainly because i can put a stop in my software,leave the trade to manage its self,look at it every now and then to adjust the trailing stop in the software and carry on looking at Nasdaq stocks.I'm not keen on the way they're traded but for swing trading i think there are some great oppertunities. What are your thoughts?

 

[TraderPattern]

Hi Naz,

I think there are opportunities to scalp them too, if one tracks the specialist.

TP

 

[Naz]

I would be interested in hearing from anyone who can do that.I
know there is a book out somewhere that suggests you can do this.I once worked with some one in a trading center who tried daily to do this for two weeks then gave up and went back to the Nasdaq.

 

[wysinawyg]

Scalping the specialist is covered in Van Tharp's Financial Freedom through Electronic Day Trading (not sure if the title is spot on)

wysinawyg

 

[Naz]

Thanks wysinawyg

Page 240-248.I'll read it all when ive finished trading today.

 

[Mr. Charts]

I scalp NYSE stocks every day - no problem whatsoever. Sometimes the specialist will drop the bid away sharply, but it comes back very quickly. This also happens with the ask, but to a lesser extent. You do need to track the spread carefully to build up a list of stocks where the spread remains narrow most of the time.
Nasdaq stocks usually have plenty of bids through a range, but you just need to know which are the really tradeable stocks.
NYSE stocks are often subject to very nice pops to close into.

 

[TraderPattern]

I suppose, paradoxically, the safest NYSE stocks are those with lower volume, since a take on the specialists intentions is clearer.

Typically a heavy bid which is upped consistently which occurs along with large orders is a good sign. Also good is a large offer which is eaten through by orders. But the approach cannot be summarised into a series of clinical rules; it is much more of an art based on the weight of evidence of what one is observing in the activities of the specialist and the traders.

 

[Naz]

I think it also depends on what style of scalping you intend to do.If your used to scalping 200 times a day with 64 proprietry orders and a proprietry Nasdaq level 2 system,where you hardly look at a chart and completely interact with the screen then scalping the NYSE is rather slow and cumbersome and impossible.

If on the other hand you look at it in a much slower fashion as i have, this is what i found.I got so frustrated at times thinking if only i could do this or if only i could do that as i do on the Nasdaq.However when i took it slowly and accepted it for what it was then yes it works.But i still like using it for swing trades and entering a stop using the superdot system which although slow to act works very well.Many times i found my swings would end up as scalps.

I missed the speed.When the specialist opened the spread i missed jumping infront of him to buy on the bid,i missed hiding my orders,i missed the confidence of seeing where my stop was and knowing that i could get it.I missed getting fills outside the spread.I hated the manipulation of the spreads and one thing i noticed, the specialist would at times with the last two orders of the day engineer large orders to go off at key support or resistance levels away from where the stock was trading, so when you looked at a daily chart it gave a false reading of where the trading truly was happening at the close.

Even though i use superdot, the fills where so slow.I missed the interaction of all the many players watching their moves and fakes.I missed the liquidity of all the ecn's.I missed the NASDAQ.

I enjoyed the flirtation but i know where my heart lies. 🙂