quote:Originally posted by jbfreedom: TEX, IM JBFREEDOM AND JUST WANTED TO SAY THANKS FOR ALL THESE POSTS I'VE BEEN READING HERE.ITS VERY OVERWHELMING TO A NEWBIE LIKE ME BUT VERY ,VERY ,VERY INTERESTING AND INFORMATIVE.THANKS FOR THE LION SITE ,AM GOING TO CHECK IT OUT.IM CERTAINLY GOING TO BE PAYING MORE ATTENTION TO YOUR POSTS....LOL THANKS TEX FOR HELPING TO PROTECT US SHAREHOLDERS WHETHER WE ACTUALLY REALIZE IT OR NOT.JUST MY OPINION OF ALL I READ.MOST IS OVER MY HEAD FOR NOW ,BUT SOME OF IT STUCK...THANKS TEX
boy, O! boy...
you're welcome.
Watch that CAPS key, though--if you mis-key here? You might well mix up a buy or sell...
posted
pretty interesting; before the new "tiers" at Pinksheets, but still interesting background from an academic perspective:
quote:Microstructure of the Pink Sheets Market
Abstract
The Pink Sheets market is a highly unregulated trading venue that is virtually free of affirmative obligations or reporting requirements. Using all quotes and trades reported through the Pink Sheets electronic quotation service and Pink Link electronic execution service in the 2004 calendar year, we examine whether regularities that exist in highly regulated markets arise for stocks traded through the Pink Sheets. We find that the market appears quite capable of creating organized rather than chaotic quotation and trading activity in an environment without a tick size, even among penny stocks, and that bid-ask spreads show a consistent relation with market maker costs.
quote:U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 20341 / October 19, 2007 SEC v. Zev Saltsman, et al., Civil Action No. 07-CV- 4370 (NGG) (E.D.N.Y.) (filed October 19, 2007) Commission Charges Short Sellers and Corporate Insiders in Massive Scheme to Conceal the Short Sellers' Control Over Ramp Corporation and Xybernaut Corporation On October 19, 2007, the Commission filed a civil action in the U.S. District Court for the Eastern District of New York against: two short sellers, Zev Saltsman and Menachem Eitan; two former officers and directors of Xybernaut Corporation, Edward G. Newman and Steven A. Newman; a former director of Xybernaut and outside counsel to Xybernaut and Ramp Corporation, Martin E. Weisberg; and Ramp's former CEO, Andrew Brown. The Commission's complaint charges the defendants with engaging in a scheme to conceal Saltsman and Eitan's control over Ramp and Xybernaut.
In particular, the Commission's complaint alleges that between 2001 and 2004, Saltsman and Eitan, through 34 nominees, invested more than $88 million in private investments in public equity ("PIPE") transactions of Xybernaut and Ramp, companies that traded on the NASDAQ Small Cap Market and the American Stock Exchange, respectively. During that period, Xybernaut issued more than 123 million shares of common stock to 21 nominees of Saltsman and Eitan in return for more than $67 million in PIPE financing. Similarly, between December 2002 and November 2004, Ramp issued more than 161 million shares of common stock to 13 nominees of Saltsman and Eitan in return for more than $21 million in PIPE financing. Xybernaut and Ramp filed 18 registration statements registering the resale of those shares, and those registration statements were misleading because, among other things, they created the impression that the investors were independent from one another and controlled by persons other than Saltsman and Eitan. Saltsman and Eitan profited from the scheme by executing short sales and covering those short positions with newly issued PIPE shares in violation of the registration provisions of the federal securities laws. Saltsman and Eitan often executed wash sales between their various nominee accounts in order to disguise these violations of the federal securities laws. As a result of their illegal conduct, Saltsman and Eitan received a total of more than $55 million in illicit profits by trading in Ramp and Xybernaut stock.
The complaint also alleges that Saltsman and Eitan paid officers and directors of Ramp and Xybernaut to ensure access to future PIPE deals and maintain control over the companies. In December 2003, Saltsman and Eitan allegedly gave Brown $50,000 in cash. In 2003 and 2004, Saltsman and Eitan paid $4.1 million to Steven Newman and Weisberg. These payments, as well as the relationships that developed between the companies' management and Saltsman and Eitan, were never disclosed in Ramp or Xybernaut's corporate filings or registration statements.
The Commission's complaint further alleges that during the course of the scheme, Brown, Weisberg, Edward Newman and Steven Newman provided valuable assistance to Saltsman and Eitan. In 2001, Weisberg helped Edward Newman and Steven Newman transfer a total of 1.1 million shares of their own Xybernaut stock to Saltsman and Eitan to allow Saltsman and Eitan to cover existing short positions in Xybernaut. In 2003, Weisberg lied to the Commission staff about sales of securities to Saltsman and Eitan that occurred during the pendency of a PIPE registration statement. Brown, Weisberg, Edward Newman and Steve Newman also concealed Saltsman and Eitan's control over the PIPE investments and the nominees.
The complaint alleges that each of the defendants violated Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and that Saltsman and Eitan also violated Sections 5(a), 5(b)(2), and 5(c) of the Securities Act and Sections 13(d) and 16(a) of the Exchange Act and Rules 13d-1, 13d-2, and 16a-3 thereunder. The complaint also alleges that Weisberg aided and abetted Xybernaut's violations of Section 14(a) of the Exchange Act and Rule 14a-9 thereunder, and that Steven Newman, Edward Newman, and Brown violated Exchange Act Rule 13a-14. The complaint further alleges that Weisberg, Steven Newman, Edward Newman and Brown aided and abetted Xybernaut and Ramp's violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13 thereunder. In its enforcement action, the Commission is seeking an order permanently enjoining the defendants from future violations of the foregoing provisions of the federal securities laws, and a final judgment ordering disgorgement of ill-gotten gains and civil penalties. The Commission also seeks officer and director bars against Weisberg, Steven Newman, Edward Newman and Brown.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the Eastern District of New York and the Federal Bureau of Investigation.
quote:As with any subjective form of technical analysis, there are, at times, variable definitions which will be defined according to the users' experience and background. This is true of some candlestick patterns. Depending on my source of information, these were instances in which I came across different, albeit usually minor, definitions of what constitutes a certain pattern. For example, one Japanese author writes that the open has to be above the prior close in order to complete a dark-cloud cover pattern (see Chapter 4). Other written and oral sources say that, for this pattern, the open should be above the prior high. In cases where there were different definitions, I chose the rules that increased the probability that the pattern's forecast would be correct. For example, the pattern referred to in the prior paragraph is a reversal signal that appears at tops. Thus, I chose the definition that the market has to open above the prior day's high. It is more bearish if the market opens above the prior day's high and then fails, then it would be if the market just opens above the prior day's close and then failed.
quote:Candlestick charts provide many useful trading signals. They do not, however, provide price targets. There are other methods to forecast targets (such as prior support or resistance levels, retracements, swing objectives, and so on). Some Japanese candlestick practitioners place a trade based on a candlestick signal. and stay with that trade until another candlestick pattern tells them to offset. Candlestick patterns should always be viewed in the context as to what occurred before and in relation to other technical evidence.
quote:As touched upon in the previous discussion, the technicals contribute to market objectivity. It is human nature, unfortunately, to see the market as we want to see it, not as it really is. How often does the following occur? A trader buys. Immediately the market falls. Does he take a loss. Usually no. Although there is no room for hope in the market, the trader will glean all the fundamentally bullish news he can in order to buoy his hope that the market will turn in his direction. Meanwhile prices continue to descend. Perhaps the market is trying to tell him something. The markets communicate with us. We can monitor these messages by using the technicals. This trader is closing his eyes and ears to the messages being sent by the market. If this trader stepped back and objectively viewed price activity, he might get a better feel of the market. What if a supposedly bullish story is released and prices do not move up or even fall? That type of price action is sending out volumes of information about the psychology of the market and how one should trade in it. I believe it was the famous trader Jesse Livermore who expressed the idea that one can see the whole better when one sees it from a distance. Technicals make us step back and get a different and, perhaps, better perspective on the market.
October 05, 2007 - One of the biggest trading houses is stepping up efforts to bypass exchanges and ECNs when laying off positions from its vast market-making operation.
Knight Equity Markets, the broker-dealer subsidiary of Knight Capital Markets, the big institutional and wholesaling firm, is executing more than 60 million of its 400 million shares per day through Knight Link, an electronic indications-of-interest service. The customers using the service include the electronic trading desks of 10 to 15 bulge bracket brokers.
Volume in Knight Link, which launched in mid-2006, ramped up this summer. In August, when volumes took off everywhere, the system executed 66 million shares per day, said Jamil Nazarali, head of electronic trading at Knight Equity Markets. In July it executed a daily average of 50 million shares, and in June an average of 33 million. Overall, the firm executes 400 million shares per day in listed and Nasdaq stocks.
Knight Link’s flow is generated by Knight’s executions against its retail broker-dealer clients, including E*Trade, Fidelity, Scottrade and Ameritrade. After Knight executes client orders, it typically seeks to lay off its position and manage its risk.
Knight Link sends streaming IOIs from Knight’s electronic trading desk directly to the routing engines of big brokers. If a broker has an order on the other side, it can send the order to Knight, which then executes the trade and reports it to the NASD/Nasdaq trade reporting facility. Knight Link also accepts immediate-or-cancel orders from some clients, instead of sending them IOIs. Nazarali says Knight Link’s fill rate is “over 90 percent” for the streaming IOIs, which represent about 75 percent of Knight Link’s executions.
Knight doesn’t charge brokers for Knight Link executions. According to Nazarali, the system’s main competitors are dark pools, which try to attract broker flow before it’s sent to the market. Knight Link’s IOIs, often for several thousand names—because of Knight’s huge market-making business—include the firm’s side and size for every name.
This IOI product is different from the traditional indications for natural contra-side liquidity that many brokers send to traders. This type of IOI from electronic market makers and dark pools is directed to algorithmic trading or electronic routing engines, not humans. The human traders are never aware of the IOIs until after a trade occurs.
Knight isn’t the only market-making firm providing this type of service. Other large electronic liquidity providers such as Automated Trading Desk, which Citi bought in June for $680 million, stream IOIs directly to the electronic trading engines at many big brokers. Goldman Sachs’ Sigma X pool, for example, gets streaming orders from about half a dozen electronic liquidity providers, including Knight Link, ATD, Liquidnet H2O and NYFIX Millennium.
Several large brokers contacted by Traders Magazine said they use Knight Link as well as similar indications-type products from other firms. These are considered additional sources of liquidity for the brokers after they internalize what they can within their own walls. All said their customers can choose to opt out of executing against this flow.
JPMorgan’s Carl Carrie, global head of algorithmic products in the broker’s electronic client solutions group, said his firm connects to Knight “in a variety of ways” and also connects to “a number of IOI-related products.” He added that there now exists “a virtual book of IOIs for algorithms to trade against.”
For brokers, an execution in Knight Link “reduces market-impact costs and avoids exchange or ECN fees,” Nazarali said. For Knight, avoiding the public markets reduces its fees, facilitates its risk management and enables the firm to take on more trading with clients because it can more easily hedge its activities.
Nazarali said the next stage for Knight Link is working with ECNs, exchanges, mid-tier and regional brokers, and order management systems and execution management systems to provide them with an additional liquidity source that can potentially reduce their execution costs.
(c) 2007 Traders Magazine and SourceMedia, Inc. All Rights Reserved.
October 05, 2007 - It’s official. First came the OMS. Then the EMS. Now there’s an AMS. Neovest, the builder of a popular execution management system, is incorporating functionality into its platform that lets traders more efficiently manage their use of the 100-plus algorithms on the system. The vendor, a subsidiary of JPMorgan, calls AlgoGenetics, its new software toolkit, an algorithmic management system, or AMS.
This “new class of software,” as Neovest deems it, lets traders construct their own “meta-algorithms”—automated execution strategies that combine algos from multiple brokers, dark pools and direct-market-access tools. In doing so, it frees them from the time-consuming process of overseeing and adjusting their electronic execution strategies.
In effect, AlgoGenetics lets traders replicate the way they trade manually through self-customized algos, which they can name, share on their desk and update whenever they want. They can also use AlgoGenetics to adapt the behavior of existing broker algos to suit their execution needs.
Free at Last
A trader can, for example, construct a meta-algo to buy a stock via a Credit Suisse implementation shortfall algo in the morning, regularly checking for crosses on NYFIX Millennium. After a predetermined portion of the order is executed, the meta-algo could switch to a JPMorgan volume-based algo, changing its participation level in the market based on the stock’s price. The algo could also be programmed to spray orders into dark pools.
“Traders don’t have to be boxed in anymore,” says Bryce Byers, Neovest’s chief executive officer. “They know which algorithms [from different brokers] they want to use for specific situations, and when to switch algos based on market conditions, price, time or other criteria. They can now leverage the strength of all their algo providers to trade exactly the way they want.” The Neovest EMS gives users a suite of DMA tools and access to 20 dark pools, 130 broker-dealers and algos from 20 brokers.
AlgoGenetics was developed by a half-dozen technologists from Neovest and a team of six from JPMorgan’s algo product development group. The platform grew out of the algorithmic customization work JPMorgan does for clients. More than 50 percent of the firm’s clients ask for some level of customization, notes Carl Carrie, global head of Neovest and algorithmic products in JPMorgan’s electronic client solutions group. He speculates that many buyside traders will eventually become conditioned to “building and harvesting their own algos.”
JPMorgan bought Neovest in 2005, at a time when other broker-dealers were snapping up independent DMA platforms. These include Citi’s acquisition of Lava Trading in 2004 and Lehman’s acquisition of RealTick in 2005. Fifteen broker-dealer “resellers” currently offer the multi-broker Neovest platform to their clients. These include Pershing, Electronic Specialist and Fidelity Capital Markets Services.
Next Step
Neovest doesn’t charge customers for the AlgoGenetics platform. As with all trading through Neovest, customers pay brokers and execution venues for the executions they receive. Neovest gets $0.0008, or 8 mils, per share from brokers, with no minimum fee.
Adam Sussman, an analyst at research firm TABB Group, notes that the functionality in Neovest’s AlgoGenetics represents the “next step” for multi-broker algorithmic aggregation platforms as execution management becomes more complex in a fragmented marketplace. The initial advance, spearheaded by Bloomberg, was enabling traders to access multiple algos from different brokers on one system. Many vendors of order management systems and EMSs, including Neovest, now aggregate algos from dozens of brokers.
Sussman sees two main benefits to this type of algorithmic management platform. First, it enables users to switch between algos without manually overseeing that process, by setting conditions “that will automatically drive an order from one algo to another.” In Sussman’s view, this is particularly important for firms shuttling 20 to 25 percent of their flow through algorithms, since those firms are likely to encounter workflow-management issues. Second, Sussman adds, creating meta-algorithms forces a trader “to automate his thought process, enabling him to map what he wants to see happen with an order onto an algorithm.”
Other technology providers, such as Progress Apama, FlexTrade and Portware, offer tool kits that enable traders to build their own algos, but these typically require some programming or computer skills and are not set up to readily use broker algos as components within a larger execution strategy.
Neovest’s Byers notes that AlgoGenetics was designed for ease of use. “A trader doesn’t have to corner a programmer or ask the sellside to customize an existing algo to meet his specifications,” he says. The trader can use AlgoGenetics’ drag-and-drop interface to create algos on the fly and put them into operation immediately.
The first clients to use Neovest’s AlgoGenetics are three New York-based hedge funds, including Scopus Asset Management. Bill Skutch, the head trader at Scopus, says the platform “allows us to maintain neutrality among brokers and take more control over algos by customizing them for individual stocks or sectors.”
Stronger Platform
Brad Bailey, a senior analyst at research firm Aite Group, points out that buyside traders increasingly want more flexibility around the algos they use. “[AlgoGenetics] is a tool that makes absolute sense if it optimizes a trader’s use of algorithms, leads to cost mitigation and has a rules-based approach to execution,” he says.
In addition to benefiting traders, AlgoGenetics could enhance Neovest’s position in a competitive landscape for multi-broker EMSs. JPMorgan’s Carrie says AlgoGenetics puts Neovest in the catbird seat. “We believe Neovest will be the strongest algo platform in the near term as a result of AlgoGenetics and our other offerings,” he says. “This empowers traders not just to trade better, but to build their own capabilities for trading better. It’s a greenfield opportunity for traders.”
(c) 2007 Traders Magazine and SourceMedia, Inc. All Rights Reserved.
October 25, 2007 - Orders sent to the public marketplace are increasingly not being filled there.
A handful of exchanges and ECNs, those entities that make up the public marketplace, have begun initiatives to pair their incoming orders that can’t be executed with those sitting in dark pools. Rather than automatically route these orders to other public market centers, as is standard practice, they are looking to ship them to broker-dealers for a fill. The nascent trend is likely to increase the number of trades done away from the displayed markets.
“We are in the middle of building a dark-pool strategy,” Brian Hyndman, a senior vice president in Nasdaq’s transaction services group, told Traders Magazine. “We plan to introduce an order type that would not only route out to the public markets, but if the customer requested, would also route to certain dark pools.”
Nasdaq is not alone. NYSE Arca, the ISE Stock Exchange, LavaFlow ECN, and Direct Edge ECN are also ramping up efforts to let their customers interact with non-displayed orders resident elsewhere. In most cases, that means the systems of broker-dealers, but it could also include those of the buyside.
Aggregation
What the exchanges and ECNs are doing is not entirely new. Direct Edge has offered an order type that routes incoming orders that can’t be executed to certain “enhanced liquidity partners,” [ELPs] including dark pools, since last year.
But the trend is picking up steam. Nasdaq says it will start development of its order type this quarter. Lava says it is in the early stages of development and is in talks with several dark pools.
The drive to “aggregate” dark pools is also not new. Most of the major broker-dealers have developed algorithms that can simultaneously “ping,” or probe, several dark pools. And some of the dark pools themselves are either entering into order-sharing arrangements with each other or else electronically alerting sellside and buyside systems to orders they hold.
Both groups of broker-dealers are reacting to the explosion in the number of dark pools and the associated volume. By accessing as many of these pools at once, the brokers satisfy their customers’ need to efficiently probe the systems. And by avoiding the public marketplaces, they avoid transaction fees.
For the exchanges and ECNs, the idea of pairing orders with those resting in third-party dark pools is not too far removed from their current practice of pairing incoming orders with orders resting undisplayed in their own systems.
Hidden Orders
Both Nasdaq and NYSE Arca in particular have found great success with hidden order types, or those resting undisplayed inside their systems. Nasdaq, for instance, says about 18 percent of its liquidity is invisible. Incoming orders have the opportunity to match up with these orders at the midpoint of the market.
The ISE, which operates an intraday crossing system called MidPoint Match, offers similar functionality. Traders using discretionary order types can trade against orders residing in the MidPoint Match at the BBO midpoint. Discretionary orders are those that display at one price on the ISE book but are set to trade at a more aggressive, undisclosed price.
Despite interest on both sides of the bright/dark divide for additional exposure, a closer partnership is not a slam dunk. The bright pools are nervous about throwing their orders into dark places. The dark pools are equally nervous about exposing their orders to the light (or to other dark pools, for that matter). Each group is worried about surrendering information to the other side.
Dark pools typically suffer from low match rates. Thus, they are eager to interact with the outside world. But they are reluctant to share their orders with others, lest they leak valuable information. So while they want contact, they want it on their terms.
And while they are not averse to alerting outsiders to the presence of specific orders resting in their systems, dark pools are nervous about letting outsiders in simply to poke around. In the past year, two dark pools—Investment Technology Group’s POSIT and Pipeline Trading—banned access to broker-dealer algorithms.
Others are cautious as well. “Everybody wants us to give them a feed into our dark pool,” says Andy Brenner, head of the ISE Stock Exchange, “but we’re not comfortable with that.”
Soliciting Interest
If the customer permits, the ISE can also send out alerts to its broker-dealer members about the existence of an order inside MidPoint Match. The ISE sends out what it calls a “solicitation of interest” that offers up the name of the stock only. It does not include any price or size information, as would a typical “indication of interest.” The SOI doesn’t indicate whether it’s a buy or sell order.
Agency broker BNY ConvergEx is grappling with the same issue as its new VortEx dark pool gets off the ground. BNY will allow ECNs and exchanges to transmit IOIs to VortEx, but has so far decided not to send VortEx orders out. “We are trying to be very careful about our client information,” says Carey Pack, president of BNY ConvergEx Execution Solutions.
Dark pools’ reluctance to throw down a welcome mat partly explains the approaches of the two ECNs trying to get inside the systems. If a Direct Edge customer opts to seek out liquidity on the books of one of the ECN’s six enhanced liquidity partners, Direct Edge will first send an IOI to the dark book. It will not simply ping the system. (When it first launched the service, it was pinging the pools, sources say.) The dark book can refuse the trade.
“Dark pools want to be dark,” says Bill O’Brien, Direct Edge’s chief executive officer. “They don’t want to put a displayed order on our book. We are not forcing them to trade.”
Despite the uncertainty of a fill with this method, Direct Edge is having some success with its ELP program. On a recent day, the ECN traded about 18 million shares of dark liquidity. That was about 5 percent of the total 320 million shares hitting Direct Edge that day. (Direct Edge’s match rate is about 50 percent.)
The percentage of Direct Edge volume trading against dark flow is up considerably from when the program started, O’Brien says. And it is likely to go higher still, he adds. “We intend to add more partners, as well as raise the profile of the program,” he says.
Recently, Knight Capital Group, the owner of Direct Edge, sold a large stake in the ECN to Goldman Sachs and Citadel Derivatives Group. Some expect the two big trading firms to become enhanced liquidity providers. O’Brien would only say that the ECN has plans to disclose the name of its ELPs in the near future as part of its branding.
Citi’s LavaFlow ECN is in the early stages of developing its dark-pool aggregation, or “hub,” plan. It is taking a different approach. Rather than ping the dark pools or transmit IOIs to them, LavaFlow plans a kind of order-sharing arrangement. An order sitting in a dark pool can simultaneously sit undisplayed in LavaFlow. If a contra-side order comes into LavaFlow and doesn’t match, it has the option of matching with the dark order in the dark pool.
Dark Strategies
LavaFlow will deliver the contra order to the dark pool. If the dark-pool order is still unexecuted, the two will match. If the order has been executed, the pool will reject the LavaFlow order. Lava is, in effect, mimicking the order-delivery functionality some exchanges offer ECNs. It is offering the dark pools the option of having orders delivered to them for possible execution. That eliminates the possibility of a double execution.
John Procopion, director of sellside execution services in Citi’s electronic trading group, describes LavaFlow as a “next-generation ECN” because it performs the traditional ECN role of displaying liquidity and also acts as an aggregator of dark liquidity.
The goal is similar to the one that put Lava Trading on Wall Street’s map nearly 10 years ago. At a time when traders were trying to cope with a growing number of ECNs, it introduced its ECN-aggregator product. Known as ColorBook, the product was a roaring success. Today, ColorBook also connects to dark pools.
More Flow
LavaFlow is being positioned to tap into the tremendous order flow passing through ColorBook. About 1.5 billion to 2 billion shares pass through the system each day. With the launch of LavaFlow earlier this year, ColorBook users have had the option of checking the ECN’s book for fills before traveling on to their destination. The ECN is open to other direct access systems although it does not route those orders out.
All trades occurring in LavaFlow are printed using the FLOW market participant identifier. All orders that route out and trade on other public venues are printed using the GOTO identifier. (A past article in this magazine mischaracterized GOTO as an algorithm that searches dark pools.) If a routed order trades in a dark pool instead, it will print under that pool’s market participant ID.
Procopion maintains LavaFlow’s order-delivery methodology is superior to both pinging and using IOIs, which expose valuable information. “Customers are not inclined to show their hands if they don’t have to,” Procopion explains. “They are willing to participate if there is something to do on the other side. They don’t want to blindly ping some proprietary engine and potentially tip their hands.”
As for IOIs, they are not firm orders. Thus, using them is not as effective as order delivery, Procopion says. “This is an actual order resting in LavaFlow,” he says of his firm’s methodology.
Exchange Strategy
Nasdaq would not discuss its strategy—IOIs, pinging or order delivery—but its plans include using its Nasdaq Execution Services broker-dealer to route to dark pools. Nasdaq is considered the most aggressive of the exchanges in this area. In fact, many sources question if industry regulations even permit exchanges to interact with undisplayed markets. Some exchange execs say it is easier for an ECN to offer these services than an exchange.
Brian Carr, president of NYFIX Millennium, one of the larger dark pools, says he is uncertain as to whether Millennium could interact with an exchange, but says the field “is wide open” for ECNs. Millennium, like ISE MidPoint Match, sends electronic alerts out to buyside and sellside systems if the customer permits.
Carr says Millennium is open to sending the alerts to ECNs. “We don’t treat ECNs any differently from broker internalization or other matching systems,” he says. “We’ll talk to anyone who has a pool of liquidity that we can easily connect to and share liquidity.”
At the ISE, Brenner says his exchange is “thinking about creative ways” to aggregate dark pools, but won’t be more specific. “Wouldn’t everybody love to be the place where all that order flow sits?” he adds. Executives from the Chicago and Philadelphia stock exchanges say they have no immediate plans to offer access to dark liquidity, but they are studying it due to its growing importance.
Princeton, N.J.-based Order Execution Services is a specialty broker-dealer that routes orders from one public marketplace to another on behalf of the outbound routing marketplace. Mike Barth, an executive vice president at OES, sees interest from his firm’s customers, often the broker-dealer units of exchanges, to “find ways to access dark pools.” Barth notes that reducing transaction costs is partly driving interest. “Everyone recognizes the value that the dark model brings,” he says, “so there is an effort to try to integrate it into Reg NMS.”
(c) 2007 Traders Magazine and SourceMedia, Inc. All Rights Reserved.
This site is about timing financial markets. It does not suggest that timing should become a part of your overall investment strategy, only that if you dismiss it entirely you may be missing something. Specifically, the site demonstrates one version of the Decision Moose framework, INDEX MOOSE, which uses exchange traded index funds in an attempt to time the markets.
The Moose first appeared on the internet in 1997. Between 1997 and 2000, while the S&P 500 was gaining an impressive 79%, Index Moose fared even better, up 179%. It went into cyber-hibernation in April 2000 when the author, William Dirlam, took a position with a new investment advisory firm and had to pull the site from the internet. U.S. stocks then suffered their worst bear market since 1929, while Index Moose returned about 300% through January 2004, at which point the model returned to the internet.
Investing Tips for Winning at Day Trading Making money is easy–it's keeping it that's tough. Here are some suggestions to help you profit over the long term By Ben Levisohn
I was 25, teaching preschool in Colorado, and getting tired of listening to a childhood friend tell me he was making more money each day "day trading" than I made in a month. When he offered me the chance to come to New York and learn how to do it too, I jumped.
At the time, of course, I knew nothing about the stock market or how it worked. But I gradually learned. At a now-defunct day-trading firm, I was taught how to trade, but the system I was taught was useless if I didn't have the mental bent to stick with it. At least there were rules I could follow. Some were ready-made; others I had to figure out myself. Some came easily; others took time to internalize. I'm no longer a day trader, but the rules are still with me. Here are the ones that helped me earn a living as a day trader for nearly eight years.
Investing 1. Have a system and stick to it like Crazy Glue. As a trader, I was a tape reader. But I was a tape reader with a niche: mid-cap stocks on the New York Stock Exchange. I watched the stocks trade, and I watched the quotes change, looking for an entry point. If a large order appeared on the tape, I'd buy myself a few hundred and see what happened. That was my system.
When you're trading, you have to have a system—rules that define which stocks you watch, and when you buy or sell. Whether you're buying undervalued large caps or short-term momentum plays, find a system that works and stick to it. There's a word for trading on tips or because a talking head mentioned it on CNBC: gambling.
2. Cut your losses. As a trader, you have to minimize your losses. When I was wrong (that is, if I knew I was wrong), I would try to exit my position with as little damage as possible. No trader makes money all the time. At my best, one-third of my trades were winners, one-third were losers, and the remaining third were negligible. But I knew I'd traded well if my biggest winner was three times the size of my biggest loser. Of course, I wasn't able to do this every day. I once lost $3,000 on a Friday and, as punishment, I got to chew on it all weekend. But there's always tomorrow. That is, unless you blow through your capital. Then you're finished, kaput.
3. The only thing you have to fear is fear itself. I was a preschool teacher before I became a day trader, and believe me, I was more suited to playing with 4-year-olds than I was to watching market machinations. When I started, I sat at my desk for a week without making a trade. My boss finally emerged from his office and informed me that it was time. So I did it. I bought 100 shares. I lost money. And I lived through it.
Still, I had a hard time accepting the notion of risk. I cost myself money every day because I was afraid of losing an eighth or a 16th on a trade. I'd dump my stock for a small profit, only to see it run up a point right after I got out. It took me a year, and cost me thousands of dollars in profits, to learn to control my fear. And you know what? During that whole time, the downside was never worse than my imagination.
4. Don't get greedy. You can't live on paper profits. But when you're holding a position that has done everything you expected—and more—it's very easy to get greedy. You start thinking, "Sure, I'm in the money a couple of grand, but it could go higher." So you hold on, long after the signs have started to indicate momentum is turning. And your gain turns into a loss. There's nothing wrong with selling into strength and taking some of your gains off the table.
5. Worry about what you can control. Ignore what you can't. When I started trading eight years ago, I heard whispers on the desk about a new trader and a trade gone bad. It was our version of the horror story around the campfire. The trader, so the story went, owned 200 shares of a stock and was in the money $200. It was a winning trade. Then the stock was halted because of accounting irregularities. It reopened down 20 points and the trader lost $4,000.
This is an extreme example, but it teaches a great lesson. In the market, events occur all the time that we have no control over. Earnings are preannounced. A takeover attempt becomes public. A CEO dies in a plane crash. Stuff happens. That story, by the way, turned out to be true. That trader could have walked away, but instead kept at it and is still in the business eight years later. The moral? Control what is in your ability to control and let the rest go.
6. The market is always right. You might think you know better than the market. Think again. The market always knows best, and if you try to fight it, you will lose. Guaranteed. I've seen trader after trader lose gobs of cash after buying a stock and watching it plummet. As they count their losses, they all say the same thing, "But the stock had good news." Good news isn't always positive, and bad news isn't always negative. If it were that easy, I'd still be trading.
7. A little bit of technical analysis never hurts. As a tape reader, I didn't care much for technical analysis. Or rather, I didn't understand most of it, and I certainly wasn't going to place an order because a computer told me to. I'll leave that to the quants. But some technical indicators are easier to understand, and more important, they matter. Take support and resistance levels: Resistance occurs on the upside, when a stock reaches a point and can't go any higher. Support is the level a stock won't trade below on the downside. They're usually pretty easy to spot. When a stock price breaks through one of them, watch out, because everyone else is. A move isn't guaranteed (there are no guarantees), but interesting things can happen.
8. Don't try to catch a falling safe. Many traders are gamblers at heart, and nothing appeals to the gambler more than trying to guess when a stock has hit rock bottom and is ready to reverse direction. The upside move is usually quick and violent, and if you're right, you stand to make a lot of money. But picking the bottom isn't easy.
In 1999, I witnessed firsthand what can happen when you're wrong. SunTrust Banks was getting hammered, and rather than doing the smart thing and shorting the stock, one of my colleagues figured he would try to catch the bounce. He bought some shares. The stock dropped. He bought some more. The shares continued to fall. The firm finally ordered him to sell. He lost $20,000.
It's really quite simple. Don't fight momentum.
9. Buy low, sell high. We hear this so often, it's easy to ignore. But forgetting it is one of the biggest mistakes a trader can make. If you're dollar-cost averaging, timing is unimportant, but if you're trading, price matters.
A stock starts to move, but you want confirmation, so you wait to buy. It moves a little more, but you're still unsure, so you let it go. Then it really starts to fly and you place your order. Your order gets filled just as the move ends. You've bought the stock from someone who had held the shares since the move started. He makes a big profit; you take a big loss, cursing your bad luck.
10. Know your exit. When the dot-com bubble popped, it took many a trading profit with it. Why? Because a lot of traders didn't have exit strategies. A stock would fall, traders would "buy the dip" and wait for it to bounce. The stocks always did. But then they didn't.
Regardless of your time frame, have an exit strategy for if a trade doesn't go your way. I liked to use stop-loss orders, which triggered a sale if a stock hit my predetermined loss threshold. But whatever you do, know when you'll get out, so a small loss doesn't turn into a big one you can't recover from.
11. Build a pyramid. If you have 100 shares and a stock moves a point, you make $100. With 1,000 shares, you can make $100 on a 10¢ move. Obviously, you can make more money with a larger position, but with it you also have more risk. So how do you balance the risk and reward? Build a pyramid.
I would typically start my position with anywhere from 500 to 1,000 shares. As the stock went up, I'd add more shares along the way. But I would try to add in smaller increments, keeping the base of my position larger than subsequent purchases. That way, if I ended up buying 100 shares more at the top, I had 1,000 from the bottom. A top-heavy pyramid topples; a bottom-heavy position protects your risk.
12. Making money is easy. Keeping it is hard. Anyone can make money in a trade. It's easy. You buy a stock, it goes up, and you sell it. Every trader can regale you with a story of his big winner. But even a monkey at a keyboard can be right every once in a while. What separates a profitable trader from that monkey is the ability to hold on to hard-won gains. Maybe these tips will help you do just that.
-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 6055 | From: Virginia | Registered: May 2006
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-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 6055 | From: Virginia | Registered: May 2006
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-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 6055 | From: Virginia | Registered: May 2006
| IP: Logged |
nice summary of the distinction between investor and trader for IRS purposes--and, no, it's *not* related to the "pattern day trader" definition re: SEC/FINRA and brokerages. Nice info on electing to go "mark-to-market," too.
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Type in the ticker and it will list what funds are buying/selling that particular stock...Click on the fund and it will also list the date of the transactions...Nice little quick check for big board players...
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