Roger M's Q&A

[FTSE Beater]

Hi Roger

I'm currently re-evaluating my current trading style/strategy, and I was hoping you (or anyone else) could answer this question for me.

You say that slippage isn't a problem with Interactive Brokers - which I can understand, direct access etc... but do you find that stocks go very quite and then suddenly jump - usually around a support level. e.g. Say support was at $40, in the last week or so I've seen spreads go from 40.05-40.06 to suddenly jumping to 39.70-39.80 etc. Is this normal, or am I missing something really really obvious.

I believe this is throwing my Risk/Reward analysis out the window - well that and jumping into trades, and overtrading - which is something that I'm going to sort out over thanksgiving, and they're trader errors as appose to strategy errors.

Any pointers would be great, and happy thanksgiving to the US

 

[RogerM]

I guess all things are relative. I found that compared to trading CFD's with CMC, slippage with IB has not been a problem. That doesn't mean I always get the exact price I want, but I find that with reasonable use of limit orders and not chasing a price, slippage is not a big issue.

Jumping on a trade in a long uptrend just as it turns is of course another matter! but that is down to lousy judgement on my part rather than slippage. Perhaps Nas can explain how Level 2 could help prevent this feature of my trading that happens too often?

 

[Naz]

Here is a little on Nasdaq level 2,lets see if it might help.

Many times a print on the time and sales will go off away from the inside market,reflecting a trade going off that price,that will then move the chart to that price and perhaps a third parties quote will then change as well.

However anyone using the level 2 screen can see that move was not a reflection of what is going on and can discount that move.Trading should then come back to where the true underlying market is.Viewing level 2 means then that you wont get shaken out of your trades easily and your risk /reward analysis will carry on working.

Direct access.
This is a feature of the screen that seems to get overlooked.If you want to trade with a market order or limit order you can.If you want to set a stop and walk away you can, the software will do this for you.However its the manual use of an array of Nasdaq orders that will allow you to buy on the bid, sell on the ask and not pay a spread,hide your orders to sneak infront of others and in general hit players on the screen especialy ECN's and know exactly what price you can trade at.This means that you dont necessarily trade at the inside bid and ask,you can trade where you think you might get an edge.

So in essence you can view the whole market action and not get thrown out of trades by sudden quick unsubstantiated movements.You can manage your trade and your stops easier by seeing the orders on the screen that you can transact against.

One final word that seems obvious to many, but people sometimes ask.Just because i bought from one market participant does not mean i have to deal with the same one when i come to sell.This is not spread betting where you can only accept your sb companies quote,part of the game is to work your order around the screen to benefit yourself and capturing a spread actualy turns you into a market maker with the public directing their trades directly at you.

It is a crying shame that the UK is so far behind the curve in this type of trading.It's power to the people.It just takes a little getting used to.

 

[Riz]

Too right, Naz on both points..doesnt look like UK willing to take the curve though...

Riz

 

[TraderPattern]

F*** the UK brokers, they are not getting any of my business. They are overpriced con merchants and the entire UK trading system is not set up for true intraday trading.

Naz and me have been consistently taking several hundred to a couple of thousand dollars on a daily basis out of the US market. If we had tried this with a stupid UK spread better or ancient UK broker, we would have probably only obtained a tiny fraction of what we made over the last few years.

USA rules for both stocks and for futures. You will get killed trying to trade European stocks, but European futures are doable.

Level II for US stocks tells you everything you need to know about the immediate momentum of a stock. You can read intentions in a way that no chart will tell you and you can predict moves with a high degree of accuracy. It takes effort to learn to use it, but once you know it you will never want to do anything else.

This so-called Level II that I see being touted for UK stocks is bullsh*t. Period.

FTSE Beater, I assume you are trading US stocks. You must learn to read the interactions of bid size and ask size with the actual levels, to avoid getting knocked around. Spend a couple of days just watching and you will start to get the drift.

 

[Naz]

Trader pattern nice to hear from you again.Once again telling everyone the truth in your own distinctive style.

I recently took a UK investor/part time trader.Entered a trade on a chart and then moved the price action around myself and invited him to tell me when he would exit.Low and behold he took a big loss.

Then i spent about 5 hours with him and gave him a chart of a set up in a Nasdaq stock.I was also able to give him one by one, a complete set of level 2 snap shots of what occured so he never knew what final outcome would be. On each snap shot he took me through chapter and verse about what he saw,various ideas to take his trade.Once in the trade he managed it correctly constantly telling me where his stop was,who he was going to get out with and what order he'd use.Finaly he came out with a very respectable paper profit.He could have made a lot more but for a first go it was very good.

Except for a smile at odd times,i dont think i interfered, it was all his own work.The look on his face was a joy to behold.It also made my day.The only difference from loosing 5 hours earlier was he'd just got to grips with a Nasdaq level 2 direct access screen!

This of course does not mean he can go straight out and earn mega bucks.Because it was done realy slowly and not in real time.But we all start somewhere.

 

[Naz]

Trader Pattern and i have been singing the praises of Nasdaq level 2 direct access on this bb for well over a year now.Both of us are still here trading the same way,with no complaints,only praises for the benefits it offers any trader.

Nearly 2 years ago a tv film crew visited me in the city and did a piece on my style of trading,they then said they were off to film one of the day traders who posted weekly in the Newspapers.I gave them my email address and told them to give it to him and offer him an open invitation to come and have a look at the benefits this style of trading offered.I never heard from him and he is no longer posting his articles.Is there some kind of denial amongst UK traders?I thought they would be all over something that gave some such an edge.

When i found out this style of trading existed i jumped on a plane and flew to the US many times to embrace its features and watch traders using it.

If you daytrade this way of trading is a must.Once you learn it and yes it takes a little time,you find you can adapt it to so many trading styles,just use your imagination.You've also got this bb to answer any questions you might have.Think about it.

 

[Mr. Charts]

Naz,
If it was jhu I'm not surprised. I made a similar offer to him as he started to lose money and slide into failure and was treated with similar disdain.
You need self confidence but humility and a constant willingness to learn in this game. Otherwise you're doomed.
R

 

[ChartMan]

Must have been that Urbanek bloke
You're right abut the benefits of L2 and I'm sure most other people will take it on board. Thing is, and I'm never really sure if this has figured in your equations :- there are people out there that only have a small amount of capital to play with. They have no choice but to chance their arm with the Spread Betters.
Sad, but true. If I had the resources, I'd be ot the bandwagon too.

 

[options]

Naz.

Was the piece aired on tv at all.

Anyway for us to see it?

I started with shares, dropped them, and now almost only trade futures/index.

Have always said that I would get you to teach me the L2 set up one day.
That's getting closer and closer.

Started out with shares like everybody else I suppose. Back when the only play was holding for a week or more. (At least)

The tech crash got that out of my system, now I lean towards intraday, and quite often scalp on a one bar move, so I'm already half way there for the L2.

It would be handy to know at the very least, as I view all knowledge as power.

How you use it is a different matter.

All the best.

Options.

 

[Mr. Charts]

You certainly need a minimum of $25000 to be a pattern day trader, but you can open a cfd account with deal4free for, I think, £5000. You can trade the US with them with only a 5% margin, not that I would suggest anyone using X20 gearing!
Trade and save to get a decent size pot - this is like any other business, don't be undercapitalised or you'll fail

 

[Naz]

You are all corect in your assumptions as to who i was refering to.The piece was done for the bbc and although i didnt see it i'm told it went out about 2 years ago just after it was filmed.

You can still open a Nasdaq level 2 account with much less than $25k.This will only allow you to do about 4/5 round trips a week.This is quite ideal for people wishing to dabble or start learning.Because you get the whole trading package free from your broker which allows you to watch the action and get used to it.Taking the occasional trade when you feel confident.

Many brokers at this stage will also offer a free dummy account at the same time so you can practice in real time and continue to learn.

I know of course that this isnt what hardened day traders on t2w want but it might be of use to someone reading the thread.