Canadian Money Forum banner
1 - 3 of 3 Posts

·
Registered
Joined
·
680 Posts
BTW, do you have Level II quotes?
It is absolutely essential to have that when trading.
Not being able to see the order queue incl. the individual order sizes is like shooting blind.
I don't agree. Those quotes are provided by HFTs and automated market makers. What that means is that they are a complete illusion. On top of a massive speed advantage these guys have special order types that basically mean they can flash quotes thousands of times per second while having order types that ensure their orders don't get filled. Throw in dark pools and Level II stopped being useful somewhere around 2008 is my guess.

Real time quotes I agree with - although that term is not very accurate given the huge delay between what we see and where the action really is going down in the first few hundred microseconds.
 

·
Registered
Joined
·
680 Posts
HFTs are not playing with every stock out there, esp. on TSX.
There are market makers that are injecting wide spreads in those cases.

Ultimately, investor has to determine the valuation of a security and decide what is an acceptable price to pay for it - usually that's a range within a few bps or so.
Being able to see the lot sizes and prices being ask/bid in the queue can help you get a slightly better price.
Even if you are not trading stocks the HFTs are using, all the market making is computerized and running software that operates in the thousands of quotes per second range.

Agreed on determining your own value and deciding on a price - that is fantastic advice and what should be the plan for every entry and exit. The exception is as mentioned above speed - if it is a very liquid security and you need to get out quickly a market order can do that for you with very little slippage on the big stuff like AAPL and SPY.

I find the L2 info to be a double edged sword - it can give you some basic information if you look up or down the book a bit further, but I always like to test it with limit orders since so much of that order book could vanish in a few microseconds if some major event happened. A few years ago I found the order book in the options space to be much more useful than L2 in stocks or futures, but as the HFTs have proliferated and market making has been automated I've seen the value of it degrade on the options markets as well.
 

·
Registered
Joined
·
680 Posts
BTW - I was extremely low in terms of # of quotes per second. This entire graph shows the aggregated quotes for options for ONE SECOND.
http://www.nanex.net/aqck2/4611.html

Here is an article with a graph of the quotes just in SPY over the last few years. http://www.nanex.net/aqck2/4569.html

Granted SPY is heavily traded by the HFTs - but when you can step in front of orders risk free you tend to do it in as many securities as you possibly can.

I wish some of this type of research existed for the TSX.
 
1 - 3 of 3 Posts
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top