Reminiscenes of a Stock Operator

[Bible_Belt]

Island is an Electronic Communications Network, or "ECN." It is an electronic book of limit orders. When you are direct access trading, you also have to select the place to which you want to send your order. Island is one routing choice. Other ECNs include Archipelago and Instinet, although there has been tremendous consolidation in the industry in the past few years.

Yeah, when I get school out of the way, I am going to start an e-mini account and trade e-mini futures. It only takes a few thousand bucks. The rules are fair, liquidity is high, and I hear that there is still tradeable movement. By next year, the Chicago merc will have forex trading through its Globex trade routing system, so I may try that, too. I won't trade futures on any exchange other than the cme. They have the most rules to protect traders.

 

[Reyaj]

Sounds good.

Everytime you post I learn something else. How does direct access trading differ from what I do personally with ameritrade?

Also, do you have a link for the E-Mini account... I am pretty much earning income and am done with school so Im ready to to make some $$$$


Thanks :rockon:

 

[Bible_Belt]

Ameritrade takes a spread on your order that they don't tell you about. They are also very slow to execute when the market is moving quickly. The real cost of trading through them is much higher than the $5 number that they advertise. Ameritrade and E-trade are like the Hyundai and Kia of brokers. A direct access account through mb trading, interactive brokers, or any of the direct access firms would be a Corvette in comparison.

http://www.daytradingstocks.com/resources/daytradingbrokers.html

www.cme.com/files/emini.pdf

http://www.cme.com/trading/

 

[Reyaj]

Thanks for the links Bible. I am starting to realize that Ameritrade really isn't all its cracked up to be.

You are right.. sometimes it takes a while for a transaction to go through.

Also, when I look up a stock it shows a a Bid Price and an Ask Price

usually the ask Price is 1 cent more.

After reading your posts I realized more that the fundamental way you can trade a stock is by simply paying whatever someone is willing to sell it for.

However ameritrade uses the fixed price per share that you'd find on Nasdaq or yahoo etc.. when purchasing...

Lets say Google is going for 300 dollars a share..... Do you think if I put a limit order of 100 dollars a share I could buy it if someone is offering it at that price? I guess it would work in theory

Also I have this crazy idea on how I can make some easy money.

I get this random email every once in a while about a Penny Stock that is supposed to go up the next day. I have been watching it and it seems that the next day these penny stocks do go up... even if its only about 4% which was the case today.

I was thinking of just buying these after I get the letter and selling them for a profit shortly after. What do you think?

You think Ameritrade will allow me to do this? Its only 1 a day.

 

[Bible_Belt]

Lets say Google is going for 300 dollars a share..... Do you think if I put a limit order of 100 dollars a share I could buy it if someone is offering it at that price? I guess it would work in theory

You could technically enter a bid to buy at that price, but it will not get traded. We have a very efficient market. If Google was at 300 and an owner send an order to sell at $100, it would immediately hit the highest bid. He might only get $299 instead of $300, but trades have to be executed at the prevailing market price. Any mistaken trade away from the market by a large amount will get broken by the exchange or the ECN when the losing party complains, as long as the complaint is timely. Part of my job at the retail firm was making these phone calls and trying to get our traders' trades broken when they really screwed up with something like a keyboard error. If the trade is several dollars away from the market, usually I could get the trade broken, which means that they void the transaction and put the money back in my client's account. Service like this is why some people will pay a little more in commission.

And about the penny stocks, this is not just my opinion, but any serious trader will tell you to stay far away from penny stocks. They're bad news for traders. Liquidity is a nightmare. There are hardly any rules to protect traders from fraud and manipulation, as well as wide spreads and high commissions.

Here's an old joke about penny stocks:

A stockbroker was "cold calling" about a penny stock and found Mr. Jones, a client. "I think this one will really move," said the broker, "it's only $1 a share."

"Buy me 1,000 shares," said Jones. The next day the stock was at $2.

Mr. Jones called the broker and said, "You were right! Buy me 5000 more shares." The next day Mr. Jones looked in the paper and the stock was at $4.

Mr. Jones ran to the phone and called the broker. "Buy me 10,000 more shares," said Mr. Jones. "Great," said the broker.

The next day when Mr. Jones looked in the paper the stock was at $9. Seeing what a great profit he had in just a few days, he phoned and told the broker, "Sell all my shares."

The broker said, "To whom? You were the only one buying that stock."

 

[Reyaj]

Thats a good one... lol yeah I guess thats definitely true about the lack of protection on those penny stocks....

Although people like Robert Kiyosaki do recommend them.

I guess the best tihng is to find a good valued company that you think will do well in the future. Seems easy enough

 

[Bible_Belt]

Everyone has their own way. Trading and investing are different universes. My problem with value investing is that stocks tend to be down for a reason, and although an investor can make 101 logical arguments why his shares should go up, all that matters is the share price. Value Investing takes a great deal of patience and can tie up capital for a long time. Obviously, some people make money this way, but I would never try it, mostly because I'm too impatient.

Trading, in contrast to investing, completely disregards the question of 'why.' Especially in day trading, where speed is a top priority, time spent wondering why is time wasted. I used a new high and new low scanner, which btw is very basic technology. Scottrade.com even had one on their web site in real time for free; there are probably others. If the market was up, I'd buy from stocks making new highs. If the market was down I'd short stocks making new lows. It all happens so quickly that there is no time to research the company. Although many stocks become familiar, I would often trade shares in companies without having any clue as to what they do as a business. Stocks with unusual volume up on the day almost always had good news, but looking up the news story and understanding the issues involved was a waste of time. The market is so complex that it makes simplicity a virtue. Good is good, and that's all that matters to a trader.

 

[Reyaj]

True stuff Bible.

The method of trading you describe reminds me of the Reminscness book about how he bought stocks on the way up and then bought more if they rose upon his buying, or sell if they went down.....

I think that might reference stop losses which seems to be a universal advice.

 

[Lynx nkaf]

i like that thing abbie hoffman did, where they stood above the stock exchange before they closed the little viewing room in and threw down tons of paper money. all these stockies went crazy trying to grab it and it fuccked the whole day up.

been thinking about abbie hoffman lately. I like that he did that with the money.

 

[Reyaj]

THROW BACK!!!!!!!!!!!!!!!!!!!!!!!

 

[eli77]

I would to start a thread dedicated to this classic as it the most recommended book in stock trading.

What does everyone think about this? What are the most important lessons derived from the book?

awesome great stuff