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Hi Jeff,
I have been swing/position trading for 13 years and daytrading full time for the last 2 years using L2 among other things.
Let me share with you some of my experience and opinions:
First of all, in my opinion, L2 data and any inferences you can make from it are only good for the next 3 to 6 minutes. If you have a time frame greater than that, watching L2 will become a hindrance rather than help, and your whole perspective will be screwed up.
For swing/positional trading, one should absolutely NOT watch L2.
But if you are in the market for scalp trades lasting for minutes only, then L2 is an indispensible tool.
Secondly, in my opinion again, reading and using L2 data is more of an art than a science. It is "tape reading". I do not think it is possible to quantify any well-defined rules or set-ups except in a very broad sense.
Thirdly, that "ax" thing is mostly a myth. The "ax" might look like selling when he is actually buying, or vice versa; or then again, he might not!! These mm's are no spring chickens, they are pros when it comes to hiding their true intentions, faking everybody out, and they have so many different venues to do that. An "ax" could look like he is selling, while at the same time he is buying like crazy through INCA, ISLD or any other ECN, and there is absolutely no way of knowing what his true intentions are. The only reliable thing is to have one of the big guys like GSCO, MLCO or MSCO jump on your side of the bid-ask, and that luxury typically lasts for like a minute or two, and for a tick or two!!
Also, you mention MASH as one of the axes for CRUS, that probably just represents the retail interest in the stock, as both MASH and NITE predominantly handle retail customer orders and rarely take any proprietary position in any stock.
So here's my $0.02, hope it helps one way or the other.
Best regards,
Levent
-----Original Message-----
From: Crystal, Jeff [SMTP:JCrystal@xxxxxxx]
Sent: Wednesday, September 08, 1999 9:05 AM
To: Realtraders@xxxxxxxxxxxx; EnsignList@xxxxxxxxxxx
Subject: Positional or swing trading with Level two Data
Hi I usually do not post on this thread but I am at home looking at some
very Interesting Data. Before I post I need to make a disclaimer I work for
DBCC and have for 6 years. Five years in tech support and one in sales. I
must say for the record this is not a sales post. It is to help me educate
my self.
I am looking for help with some T&A I am working on, Also for the record I
use all types of real time software packages. They all have some strengths.
Tonight I was reviewing a beta release of Ensign Software. That Runs on
Esignal Data over the I-net. Howard and Kimball at Ensign have done some
very interesting things with Level Two Data. They allow you to plot the
market makers bid and ask, Set Alerts on a mmid and Do technical work off a
chart on the MMID. This type of data intrigues me.
I would like some help doing some technical work with Level Two Data. For
example. IF you go to www.nasdaqtrader.com and go into trading data you can
find the lead MMID. I am looking at Plotting the top three MMids per stock
and looking at their movements. The chart would look something like a moving
average based on the bid and ask. In other works you have three channels
that continually cross each other.
My Goal is to look at three ratios, # of times a primary MMID was best Bid,
ask, and the number of times he crossed his competitors fighting for
position. For example If I had a stock that I thought would break to the
upside because of any number of T&A formations and I also had a Bid and ask
ration of 10 to one on the BID side I should see movement to the upside.
This could tell me if the stock was under accumulation or if it was going to
be held in a trading range. I can think of a lot of creative ways to use
this data as a swing trader. Any thoughts on some interesting ways to use a
Primary MMID against him self.
I should say one more thing I only trade NASDAQ optionable stocks that are
priced 50 dollars or lower and have volume of at least 100,000 shares per
day. I have found that the # of MM's that lead the stock are more clearly
defined. For example on the stock CRUS. MASH, MILCO are the clear leader in
shares traded on this stock. This type of DATA is new to me so I would
welcome any comments on how to more effectively use it. Ensign has not
released this to the public and will not support it for several more days.
So do not call them. I on the other hand would welcome any comments. I can
be reached several ways.
Before I go one more disclaimer, I am not representing DBCC tonight and I am
only looking for my own edification.
Jeff Crystal
JCRYSTAL @DBC.com or KELTNER001@xxxxxxx
800-287-9517 Work
801-766-1044 Home office
801-859-6616 Cell Phone
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