Millionaire Traders

JWBK169-Lien July 3, 2007 13:56

Millionaire Traders

A: Right, exactly. Here is another example. If you know some of

the big market makers in the stock you can sometimes see what

he does. It used to be that you could see on Island [Authors’ note:

Island was a very popular Electronic Communication Network on

which traders could make bids and offers for stocks.] who sold

or bought from you. I remember one time Goldman was on the

offer, and I would offer Island, and he would buy from me, so you

knew he was faking his offer in order to make sure that the stock

wouldn’t get away from him. By becoming familiar with the stock

and knowing who the big players are, you could tell who is faking

or not. If the market is 79 by 80, and I buy all the 80 offers, then

the market maker gets pissed off. But if I join him and buy the 79s

with him, and as long as you are buying with them and not taking

all of their 80s, then they’ll take you up for the ride. In that case

the market maker is really a buyer at 79 and he doesn’t want to sell

at 80. There are a lot of fake bids and offers in the Nasdaq, and

if you are able to identify what they are, then you can use it as a

clue for information as to what is going on. So by watching I get

my edge. If you don’t have an edge, you don’t have anything. An

up market means nothing. Every day you can have the Dow be up,

but you will have 100 stocks up and 100 stocks down.

Q: This brings us to the next question. Precisely because these

are not Dow or the SP 500 or the Nasdaq 100 stocks, they are

less subject to broader market swings. Are they less vulnerable to

market sweeps by the stock index futures as well?

A: Sometimes they are, sometimes not. But you will know. Here

is an example. The market is going down. It is going down hard. But

you see there is one guy buying, staying on the bid. You identify

who he is and then you want to buy with him. But if he leaves

you, get out. I don’t like to buy highs and sell lows. I like to buy

pullbacks. Or I’ll take a shot at buying a low or selling a high if I

see a seller and go with him.