MM motive question

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rebeltrade

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But first, although I have been lurking and learning from many here, this is the first time posting.

I'm in the US, don't trade daily but usually watch the market closely .. anyways my question is what is/could an MM's motive be if he is on the bid/ask at the same time?

NMKT has PUGS working both and I don't see the point.

Thanks to all.
 
Well thats for sure. Are you saying to hide that they are actually buying or selling?

Like sell one share, buy two?
 
Unlikely in my view and it depends on which MM you are talking about. If it is a MM who has no real power to influence the stock then it wouldnt really matter. If it is the Ax (the MM who does more trades in the stock than any other) then again there are all sorts of tricks they can get up to.

If the Ax wanted you to think they are buying when in fact they want to sell then they could sit on the inside Bid with a large size (say 500) but then be selling stock by the thousands using an ECN or SIZE. In that case you wouldnt have a clue what was going on.

MM dont always play tricks, NITE as an example is not as devious as say GSCO and it will all depend on the circumstances at the time of what it is they are trying to achieve.


Paul
 
I have seen SCHB (who is devious) sit on both side in the last 5 mins more than once, as the Ax in a stock.

His motive...Confuse the people watching the Level ll

Just look at the time and sales and you might get a better idea of what is going on. If it is a high volume stock and he is obviously buying far more than selling, then you know he is a buyer (or vice versa).

The 'time and sales' edge works better or the higher volume stocks - it is easier to read.
 
A daft question possibly but any help would be appreciated.

Do spreadbetting firms, brokers etc tell mm's where clients stops are placed so the MM can then mark the prices down to trigger the stops and put more money in their pockets?

Paul, how long have you been trading? Are you full time? I have been reading a number of threads where you "pop up" and your knowledge appears very deep (forgive the sycophancy).
 
Appreciate the replies

I'm using Ameritrade (aka Ameriturde to some) and their L2 does not have time/sales. I'm finding the delayed info a handicap lately.
 
No I am not full time.
No I am not any sort of expert.

There are some very professional (read profitable) traders on this forum though.

I have learnt, in many things in life to keep my mouth shut when I don't know what I am talking about and only answer questions when I think I have something that I can truly add to a discussion.

As for how long I have been trading ... If I say how long then some people will tell you that I don't know what I am talking about 'cause I haven't been in the game long enough, others will think that I have 'paid my dues' and can be considered a seasoned player. So I will refrain from answering that question if you don't mind.

But my own opinion of my ability is that I am no expert in this art.

As for the other part of your question...

Brokers and spreadbet companies etc do not tell the MMs where the stops are - they don't need to.

The market makers are some of the most proficient traders around, they can analyse a chart, price action and psychology of the traders better than most and can tell where many people put their stops. These were the people who actually created the market before ECNs (They still do, they just aren't the sole players now). They have more insight to the stock and the players than the rest of us both because of their professional abilities and because they execute many many trades on behalf of their broker and institutional clients. They know what the crowd is thinking.

Instead of thinking how the MM is trying to fool you, cause they will if you are trying to second guess them, think of them as your friend, your guide. If anyone knows where the stock is going - they do.

Find the ax (the MM who trades the most in any given stock) watch him.

If you day trade then just sitting for a day or two and watching the ax in any one particular stock can be rather educational as you see him and watch how he plays the crowd and the price action. If you swing trade (or longer) then you may or may not want to do that, but do watch him at the time when you feel the stock is going to go in the direction you wish to trade.

Even as a swing trader you can get a better insight to your entries and exits if you follow the ax.

By the way, if you are interested in Level 2 or Nasdaq in general, have a look for the posts by Naz.
 
DITD,

There are a couple of things to understand here:

1) MM couldnt care less about Spreadbetting Companies as they are in entirely different types of business. Also SB is not permitted in the USA where all Nasdaq trading is carried out so there is even less reason for them to take an interest in SB. There has been a lot of discussion about the tricks that SB companies may get up to one of which is to spike prices to take out stops. I dont use SB companies but I do have friends that do and on a number of occassions they have been spiked out of a trade by the SB comany quote. In all cases they have their own separate realtime data-feed and in most cases when spiked out the market has not traded at the quoted SB price. So they call up the SB company and argue their case and always get the stop out removed so long as they have a chart from their own data feed and are prepared to send a screenshot to prove it.

2) Brokers are totally different to SB companies. All brokers do is match orders and that is it and what they want is for their customers to trade as often as possible because they make their money from commissions. There is no incentive whatsoever for them to inform MM of where customer stops are located. Most MM know where stops are likely to be because most people use the same methods to trade, they dont actually know how many orders are placed at key stop points but they may well go gunning in anticipation of them..



Paul
 
As for why an MM is on both sides, Market Makers HAVE TO have at least a minimal order on both sides. They are making the market in the stock. They will make money on the spread. Look at the Level II at some point - every one of the entries that you see on the BID side has a corresponding entry on the ASK. You might not see it on Ameritrade's Level II because they only show the top 15 orders on each side, but you will see that on any full Level II display

Jerry Medved
http://www.quotetracker.com
 
Does QT work with Safari/Mac?

Medved, I understand the MM on both sides but didn't get why an MM would be "at the top" on both bid/ask. Are you saying a reason could be, "They will make money on the spread", in other words any buy/sell goes through that MM and that is a reason to be on both bid/ask at the top?

Another (silly?) question ., if a stock is sold at a loss who ends up with the difference .. ie, buy @1.00, sell @.50, who pockets the lost .50?
 
think of it this way, if you sold for a loss, then using your example, someone else had to sell to you at $1.00 and then buy back at $0.50 - they are the ones pocketing the difference.

As for MM, when people place market orders, they will usually end up buying at the ask, selling at the bid. The MM handles these buys/sells but obviously on the other end, so they end up buying at the bid, selling at the ask.

You can do the same thing in affect by placing the orders via an ECN - you can have a buy at the bid, sell at the ask orders at the same time. If you get filled on the buy order and then on the sell order, you , end up pocketing the difference. If you think that the market is moving up, you would shift the sell order higher, to ensure that you don't just get filled on one side. Thats all it is in a nutshell
 
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