NASDAQ Level II Trading Strategies

8/7/2019 NASDAQ Level II Trading Strategies

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OnLine or A BlindMans Miracle

NASDAQ Level IITrading Strategies

With Mike McMahon


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To DAT and Back..

How we got here

Synopsis of Trading History

Online vs Direct Access

Level II nuts & bolts

Level II Reading

Your Involvement and your Risks

Summary


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Progress .

We stood Face-to-Face

and Argued whether a

Wheel was worth 2 Clubs


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Progress..

We stood Face-to-Face and Arguedwhether

2 Pigs equaled a Bushel of Grain


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Progress..

Suddenly, it got formal

We could no longerseeeach other

Somebody had toexchange the pigsfor the clubs,the clubs for the wheeland the wheel for thegrain.

We wanted Bread!


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Big BrokersStepped in to

Help US!

We Lost Sight

Progress??


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Whats a broker? A Middleman.

What do Middlemen do?

They cost you

Money

Time

Control

You can no longersee whats going onwith your trade


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So

We decided that:

We can do it ALONE!

We can do it better!

We dont need to shareOUR profits!

Just Give US the Infoand a Computer!


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A Vital Piece of Information

We got the Computer

We got Level I

We had the Info that

the Broker had

Or Did WE ?!?


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Welcome to bigbroker.com

Trading.

Faster Executions!

The Best Fills!

Real-Time Data!

Who are weKidding!


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Shortcomings or Short-Sighted

How can you climb up out of

the Online rut?

How can you trade face-to-face again?

Is there a a Better Way?


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ECNs.Vision Restored

ElectronicCommunication

Networks

Incredible Trade Clearing

Transparency intothe Market

Allows you toAdvertise!

Allows you Negotiate!


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ECNs .To See or to Use

To See

You only need $$$$.and thewindow opens

To Use

A Direct Access Brokerwho will helpyou onto the Hwy of DAT

CyBerTrader, Tradescape, TradePortal, RealTick,On-Site, Momentum, GroTrade, A.B. Watley, and

others


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Who Is that MASKED MAN..?

ISLD Island - Datek

INCA InstiNet

ARCA Archipelago - Terra Nova Sec.

ATTN All-Tech Invest.

BTRD Bloomberg

BRUT Brass Utility (+ Strike 5/00)

REDI Speer, Leads, Kellogg

NTRD Nex-Trade MKXT Market XT (Joined 4/00)


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The Other PlayersMarket Makers

Firms that Make a Market On Bid & Ask at all times

Major Players You should know Goldman Sachs = GSCO

Merrill Lynch = MLCO

Morgan Stanley = MSCO

JP Morgan = JPMS

These are just a few that represent

different areas NASD.Com and NASDAQ Trader.com


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ECNs

Better Prices !

NarrowerSpreads!

Direct Access


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Level I vs Level II

The New Tools

of the Trade


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Level I

Your Level I may look like this:

But What do You Know?Whos Buying, Whos Selling? How Much, How Often?


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Level II

Now you See

Whos Buying

How Much

Now, Real-Time!


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Level II

Now you See

Whos Selling

How Much

Now, Real-Time!


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Present Support &Future Resistance

Or just the Bid & Ask


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Level II Scenarios

Goldman Sachs isBuyingBuyingEverything

Wouldnt You Like

to Know that?

Level II makes it

SEEN

DAT allows youto Trade It!


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Level II is a Great Tool..But

It is only ONE ofmany

You need to learn

to SEE withnew eyes

Next is EXDS withHuge Support

But the S & PFutures are dying!


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The Resistance Starts to Take Hold


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MONT Relieves, Leaving RSSF at the BidSBSH is Showing Unusual SizeThe ECNs are Growing at the Offer

The Prints Confirm the Weakening


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RSSF Relieves

A Bunch Jump to the New Low OfferGSCO Holds the Fort


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Nobody Wants to Stick Around MMs Leave it to the ECNsECNs Have Good size on Bid but Prints say Down

GSCO has Moved to the 1/2


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Sentiment Has Changed 1 Minute Later


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The ECNs are now joined by 4 MMs at Bid

NITE has left the Ask & moved to 13/16 or higherPrints show Strength to the Upside


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NITE & HRZG join the ECNs at new HIGH BIDMSCO has relieved to 3/4 - 1/8 move Typical

Looks like Resistance at Ask but its 4500 to 4500No real confirmation in Prints - yet


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MLCO, SBSH & Others lift to the 3/4Prints show decent Size and Number for Up Move


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JPMS Jumps higher at least an 1/8Prints say the ECNs are unlikely to be Filled at 5/8SBSH has dropped unusual Size without being HitLooks like Formidable Resistance at the 3/4


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11/16 wraps around to the BidNotice the light Share Size on the MMs on Ask


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Prints show a crunch through of the 3/4ECNs have good size on Bid

But MSCO wants to sell and holds the rise


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MSCO is taken out but MONT & PRUS Join the AskNotice Unusual Share size for PRUS

More 11/16s start to Print


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PRUS lifts leaving MONT

Meanwhile ECNs are mounting Size to Buy


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3/4 wraps around & BTRD joins the HuntHRZG has dropped to 5/8 GSCO has moved up 1/8

And NITE is showing only 500 NowPrints are Ambivalent


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13/16s are taken out Actually most canceledGSCO has moved from the 5/8 to the 3/4

a 1/8 moveLook for a new High Bid


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We get it at 13/16 with NITE, REDI & INCAPrints look good for the 7/8 AttackBut Size to Sell on the ECNs


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ECNs join the MMs at the 7/8 with Size to SellREDI bails from the Bid

Prints start to show serious Size at Bid Price


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The Upturn weakens & a new Low Offer shows upSupport looks good but the Wave has Broken,

We settle into a Tug-of-War at 3/4 to the 7/8


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Level II & DAT..

Theres a Lot Going on

Support & Resistance

Whos Who Whos been doing it the Most

Size of the Prints in Confirmation

Speed of the Momentum

The changing of Sentiment

Theres More..A Lot More


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Who are Youand what do You want?

Trading is NOT a

Get-Rich-Quick Scheme

It is stepping away from

the old and dispellingthe myths..

It is not Magic, butUnderstanding and

Hard Work


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Whats DAT/ Whos DAT?

To explain DAT.

OnLine is merely

E-Mail to a Trade Desk

Trade Desks Handle

your Order

DAT allows YOU, with helpfrom a Broker/Dealer(B/D), to place and ControlYour Own Order


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With DAT or Without

Level II Allows you tosee Buying pressures

Level II Allows you tosee Momentum

Level II Allows you tosee Whos There

DAT gives you DirectRouting of your Order


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Your Control.. Your Fate

DAT allows you to Enter,Place and Monitor Ordersin the Market

Nobody holds your Hand

The Risk is controlled only

through your Knowledgeand Discipline


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Reward is Equal to Risk.or not!

Learning to Trade isthe Key.

Reducing Risk is the Goal..

Learn How not to LoseFirst..

Then learn How to Keepyour Wins

Only Then is Risk = Reward


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Vive La Difference!Vive La Difference!

Direct Access Tradinggives you Power,

Direction and Dominionover your order flow,

and over the use of YourMoney

Its about Time.. Its about Education


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CreditsSubject-Matter ExpertMike McMahon

Technical ConsultantKevin Green

Design ConsultantDavid Stansfield

ProgrammingGuy Shurki


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FINIS

NASDAQ Level II Trading Strategies

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Transcript of NASDAQ Level II Trading Strategies