JWBK169-Lien July 3, 2007 13:56
Man Versus MachineMercantile Exchange, where he found the smaller, slower Nikkei
pit provided him with a much better edge than the more crowded
S&P pit, Steven Ickow took the same philosophy to the screen
and decided to specialize only in medium-cap stocks that trade an
average of 1 million shares per day. Those types of stocks attract
less attention from the day-trading crowd and allow Ickow, who
is a master of observation, to better handicap the price action,
quickly picking up on the nuances of the move. This idea can be
extended even further for most traders. We, for example, have
never been comfortable day trading the stock index futures, which
tend to move in very herky-jerky fashion quite often in direct
opposition to the news. On the other hand, we took to the currency
market like fish to water, instantly making the connection between
macroeconomics, geopolitical events, and price flow. Therefore,
struggling traders should examine their market of choice before
examining their methodology.Use Reconnaissance Orders
A big part of Steven’s day is spent breaking even. Of the more than
200 trades that he puts on every day, a significant proportion ends
up in scratch because he is using the small orders to probe the
market. By watching how the market reacts to his moves, Steven
often gleans very valuable information about the intent of the play-
ers in the stock. He can then exploit this information for profitable
setups. This use of “reconnaissance” orders is a technique em-
ployed not only by him but by some of the biggest and most fa-
mous traders in the world. George Soros was well known to put
out orders in the opposite direction of his true view just to see
how well the markets absorbed the order flow. If his “opposite”
trade became profitable, he would revaluate his thesis and would
on occasion hold off on trading his real intentions until market
conditions became more favorable.Focus, Focus, Focus!
Speculation is observation. In order to observe carefully a trader
needs total concentration and complete focus. Steven Ickow does