direct access???

[mcharlton]

This may seam a v stupid question to those that know... but...

I have read somewhere that by using a direct access broker you can buy at (or close to) bid and sell at offer... is this true??

If this is true is it not possible to make instant profit by buying and selling higher spread shares (ie 5-6%). after allowing for costs there is still the opportunity to be left with 2-3% profit. Obviously the larger the spread, the lower the liquidity. But looking at the UK AIM (is direct access possible to this market?) there are often shares that look workable...

Thanks in advance for replies to this...

 

[TWI]

You can, free money. But keep it a secret ;-)
Only problem is who is to say that you will get filled both sides?
When a stock moves down several layers of bids may get taken out leaving you out of the money if you were hit at the first level and end up long at that level when the market has already moved a long way below that price and it is now offered below your original bid.
There are people who make their living market making stocks but it is actually better to do it on the very liquid stocks cos people tend to be hitting bids and lifting offers all the time there, with illiquid ones you could get stuck with a nasty position and find it very hard to get out.

 

[mcharlton]

Thanks for your reply...

I take your point about getting stuck..

My interest stems from the fact that 90% of the time i can pick a share that will increase in value over the next 12-24hrs, especially with AIM shares as volume is an easy pointer, however as I have limited funds to trade, an increase of 10% is sometimes necassary to just breakeven. By taking advantage of the spread it would reduce my costs by a large amount...

I think it is something that may need to be put into practice before before I can really see if it will work or not.

 

[TWI]

There is no easy money in my experience. Please let me know if you find it.

 

[TheBramble]

MC - if you can pick, with 90% accuracy, shares that will increase in value within 12-24 hours then you really have an edge. Trust me!

I guess from your post that you're using volume.

If it's not an indecently obvious question, what system are you using to get that level of wins?

And even with minimal funds (using appropriate risk & money management etc.) you should be seriously cash-rich within a matter of weeks.

 

[mcharlton]

Bit of a difficult system to explain... basically having spent a lot of time studying the shares on the AIM listings it became apparent that the majority of them do very little all year.

By looking for extreme movements in price backed up by volume and then looking at the reasons behind that movement, you can hang on to the coat tails of a price move.

Clearly you will miss the majority of the move but you can still get a gain.

However, it is not as easy as looking for a price move backed by volume and then buying (obviously...) you have to look at how the price has moved in the past and interpret from there...

Not sure if that made sense...

The main problem is due to the largish spread involved and the fact you are only getting the end of a rise, the majortiy of the time is spent breaking even. Hence my interest in illiminating as much of the spread as possible.

 

[TheBramble]

Have you considered applying your system to the more liquid, main market stocks?

Spreads may be smaller.

Of course, the stocks' behaviour may also be different...

Higher volume generally leads to larger spreads, so it would seem that you may have to live with that aspect of your system as an operational constraint/factor.

Identifying the trend even just a little earlier would get you in on somewhere between 'normal' to 'increased' volume and in at a correspondingly narrower spread. I'm sure you've already looked at that.