Why some of your best winning trades start out looking like losers
When you take a trade
for a reason, don’t be shaken out by the market makers. When I had an
order as a market maker I would try everything in the book to shake up the stock
without showing my hand as to what I was doing. If I had a buy order my first
action would be to test the bids to see if I had company or to buy stock cheaper
if there were any sellers around and vice versa if I was a seller. The customers
appreciated the effort and if nothing else it was a great way of gaining
information regarding the current supply and demand situation. There are a lot
of games played, so try not to be fooled by watching each and every tick too
closely.
Take a look at an old favorite of mine, Techne
Corp.
(
TECH |
Quote |
Chart |
News |
PowerRating).
The stock is in a strong uptrend. The stock has
an ADX of around 44 as I write
this. If you bought this on the pullback from the big up-day last week, use the
area around the low on 9/6 (55.55) with a little room as your exit if the trade
goes bad. Don’t watch all the BS of the market makers and the ticks. A buyer can
create the illusion of sellers by using various ECNs putting minimal share
amounts for sale while bidding for stock.
If a seller comes into the
market the shorts who have received indications from their friendly sales trader
shopping the order probably know exactly what the seller has and will be leaning
all over the stock trying to get it down to cover some.
Other market makers with buy orders who also have sniffed out the seller will
likely get in on the action by hitting bids, trying to force the seller into
selling at inferior prices. Other traders looking for a quick trade on the short
side may be in there as well.
The shorts put stock up for sale, trying to
drive the stock lower.
If the shorts are unsuccessful in covering at
lower prices they may create extra buying pressure after the seller is finished
and the stock proves to be in solid shape.
Stick to your guns and don’t be
shaken out of potentially good trades by the games being played. Pick levels and
be out when proven wrong.
Good luck trading and have a nice weekend.
Ken
Kenneth Levey is head of Trading For Connors
Capital LLC. Mr. Levey has more than 21 years of professional trading experience
having previously been Vice President of Trading and a Market Maker for Spear,
Leeds & Kellogg/ Goldman Sachs in New York.
Ken is a 1984 graduate of the University of
Miami where he received his degree in Business Administration majoring in
Finance.