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Good point Mark, but I'd like to know how you know whether or not a fake is
being set-up in the following situation:
1. Several MMs are on both the Bid & Ask with reasonably balanced number of
shares.
2. An imbalance begins to appear. Three or less MMs remain on the Ask and
10 on the Bid. About 5000 shares represented on the Ask and 30,000
represented on the Bid (choose your own numbers if you don't like these).
3. In a classic scenario, with 30,000 buyers and only 5000 sellers (so to
speak) you would expect the price to rise soon.
4. After a brief period of time passes and a large number of orders are
filled in the Spread-- the imbalance suddenly changes (in about 5 to 10
seconds) and all the MMS formerly on the Ask are now on the Bid -- the
recent buyers are caught holding their respective bags and the Market
plunges from one to three points.
5. When I was trading L2, I observed this regularly on the heavily traded
Tech Stocks (CSCO, MSFT, ASND, etc.) -- from what I could tell, one of the
two scenarios (real or fake) each played out about 50% of the time but it
was impossible to tell which was being played out until it was far too late.
Question: How do you know when it's REAL and when it's MEMOREX??? (and
please don't say you need to be psychic :)
____________________________________
At 04:45 PM 8/29/98 -0700, you wrote:
>Your points are very well made and correct. Therefore, the object is to
>join in with the Market Makers, not to fight them. Learn how to read their
>real movement, not what they want the public to think.
>
>It is so bad, you can almost do the opposite of what a normal person would
>think looking at a screen.
>
>Good trading skills are very important too.
>
>Mark
>
>Mark A. Seleznov
>
>>Agreed. But a marketmaker with order flow is a formidable force
>>indeed. In fact, my definition of marketmaker absolutely includes
>>access to order flow. They are generally hedged within a range, and
>>they have capital, and they can literally fix the prices under certain
>>circumstances. It takes more than an level 2 and good intentions to
>>enter that ring with a fighting chance -- IF we're talking about
>>daytrading.
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