|
PureBytes Links
Trading Reference Links
|
Ron Augustine wrote:
> Great theory but you're a couple of years too late-- Level II was much more
> useful before the NASDAQ rules changes in early '97 -- Once the MMs got wind
> of what the original Soes Bandits were doing, they got very good at
> head-fakes and other deceptive tactics and the former advantage of Level II
> trading vanished.
I cannot imagine anyone choosing to trade NASDAQ stocks without the benefit of
L2. Basically, all L2 consists of is a detailed listing of the various MM's and
ECN's that have bids and offers posted on the system. The NASDAQ market is
tricky enough anyway - and this is valuable information to have for active
traders whether or not they choose to make markets (the example cited - which
btw, still can be done without a lot of trouble). One can see the in real time
the quantity and number of bids and offers at various price levels, which is
certainly more informative than the Level 1 quotes used by amateurs.
> As I mentioned here before, if you feel you need this type of excitement, I
> suggest walking across the freeway at high-noon, blindfolded.
If you really want excitement, try trading without L2 - with no idea of supply
and demand, bid and ask support, etc. - especially with the more thinly traded
issues.
> You'll
> probably get a brief adrenaline rush but you'll also avoid the exorbitant
> Level II fees... :)
Actually, the exchange fee is $50 per month - and if you are an active trader,
you should be getting this for free, as well as any other fees other than
commissions.
While there are still hoards of traders scalping teenies all say long, most do
not try to compete with MM's by making markets (although the wider spreads do
present some decent opportunities to those so inclined), but rather attempt to
take advantage of short term minor price fluctuations. While SOES is still in
use, it has declined in popularity, and ECN's are taking over as the vehicle of
choice for stock daytraders. However, not all these traders scalp, as there are
a variety of strategies of varying average holding periods that can and are
being employed to trade stocks on a short term basis. Essentially, L2 is simply
a quote service, which can supply useful information to active stock traders,
whatever style they use.
Regards,
A.J.
|