Friday, January 29, 2010

NASDAQ II - How to get into direct access trading - TIP

direct access trading - limit your risks

around 1600 trading paper

big brokers made us lose sight

created a veil of mystic

they were not true

they were simply middle men

they cost you more

you start losing both money and control


online trading

we can do it alone and we can do it better

we don't need to share our profits

just give us the info and a computer

we have the same information as our broker but not the same info as our broker's trade desk

nasdak level II

you can now understand the transparency of the market with level II

we get to see who wants and who doesn't want, who has a need and who has a supply.

On level one, you are stacked with the inside bid.

Biggest break through in online trading came with ECN = Electronic communication networks.

---> Trade clearing
---> Transparency into the market
---> Allows you to advertise
---> Allows you to negociate

everybody knows what everybody else is doing

ECN = satellite nasdaq


ECN's are seen by lots of people

A lot of brokers and people have access to level II - They can give you access to the info but don't let you use it!


Direct access brokerage

these are the new wave guys

help you get on the highway of data

you are still no getting awat from the comissions

with level II, you have your hands on the steering wheel. You are in control all the time, you simply pay an toll access.

If you have to pay a commission, you might as well have the control

Right now, we have 9 ECN's

Nasdaq is the only one that has level II

Ebay is an ECN for your garage junk

Day traders - electronic traders

A trap is not a trap if you see it

if you see it, it can be an opportunity

The ECN's are were the traders are


The other players: the market makers

A market maker is somebody who makes a market

Around 500 market makers available.

if a market maker is not on both sides of the trade at all times, for a period more than 5 min, they are thrown out of that stock for 20 days

Cisco trades at around 35'000-40'000 shares/min !!!

390 min in a trading day x 20 trading days

if you're going to be a trader, you need to know the top players in each sector of the market

Those players are different for different stocks and different sectors

where can you find who is the top player for any stock?

check for market participants

you can check by stock or by participant


as new traders, you want to stay away from volatile stocks

you better know the players in your stock

you better know too theire overall position in that stock

are they net buyers? are they net sellers?


Who bought the market when the market hit bottom in 1987? The market makers!


Level II is a great tool but it is only one of many

You need to learn to see with new eyes