An NYSE Scalper's Tale - A Trader's Diary

Monday, September 18, 2006

NYSE Stocks & Their "Personality"

Gross: +$852.76
Net: +$705.56
Loss From Top: 0
Trades: 88
Shares Traded: 128776

Stocks Traded Today (net profit/loss):
Motorola (MOT): +$449.66
Home Depot (HD): +$109.48
Exxon Mobil (XOM): +$81.72
Hewlett Packard (HPQ): +$74.94
Walmart (WMT): +$30.48
Advanced Micro Devices (AMD): -$40.75

Since I don't have much to say about today's trading (was fairly boring...I just followed my rules and I focused on when NOT to trade), I thought I'd share with you some of the "personalities" of some of the stocks that are traded on the NYSE.

What do I mean by a stock's "personality"?

Well, as you all know, each stock traded on the NYSE has someone called the specialist. The specialists' main job is to match up buy and sell orders, to trade from his/her account to dampen volitility, and to maintain orderly markets.

Since each person is different, in a way, each stock is different. When I say "personality", I mean things like order execution, ease of cancelling orders, and how fast (or slow) the specialist reacts to sudden movements in price.

Before I go on, let me review some aspects about NYSE stocks (in case you don't know).

First: Price Improvement. Sometimes on the NYSE, if you put in an order to buy or sell, you can sometimes get a better price than you had expected because the specialist can price improve you. An example, let's say I'm long at $1.00 and let's say I put in a sell order at $1.10 (for a 10-cent profit). Now let's say there is a sudden influx of buy orders that push prices up. Instead of getting $1.10, let's say I get filled at $1.15. I've just been price improved by the specialist (instead of a 10-cent profit, I got a 15-cent profit).

Another thing is this: if you put in an order that goes to the specialist (or your order is routed to the specialist) and you decide to cancel your order, the specialist has to acknowledge your cancel order before it becomes official. BUT, if the specialist is too busy filling a big order, he/she may not acknowledge your cancel and he/she may fill you! (Note that this does not occur if you use an ECN).

Lastly: if there is an influx of buy/sell orders, there will often be a slight delay as the specialist figures things out and tries to match up orders and decides at what price he/she should price improve.

Please note that the following is based on my personal observations and I mainly use Walmart (WMT) as a benchmark. When I first started as a trainee, I traded WMT for 6 months, and as a result, most of the following comparisons are relative to WMT.

And now, I'll review with you four of the stocks traded on the NYSE and their "personalities".

Walmart (WMT):
  • I would consider this stock to be average all around
  • When there is an influx of buy or sell orders, I would say that the specialist gives just enough of a delay for you to react accordingly while he/she's busy filling orders
  • I would say that the specialists' price improvement is average, but I have a feeling that the specialist tries his/her best to dampen the volitility (hence only the average price improvement)
  • For the most part, the specialist on WMT is pretty good in delaying long enough for buyers and seller to put in orders so that he/she can match these order up - as a result, WMT is not as choppy as some other stocks
  • It's hit and miss when it comes to cancelling your orders when prices are moving fast...sometimes the specialist will cancel your order before it gets filled, other times he'll fill you

Exxon Mobil (XOM):
  • The specialist on this stock is very fast and will execute and fill you fairly fast
  • Price improvement is pretty good on this stock...mainly because the specialist is soo fast whenever there is a big buy/sell order, he'll fill them fairly quickly, price improving people along the way
  • The specialist is also pretty good in cancelling your orders...there have been several times I put in an order to hit size on the offer, but then decided to cancel it right away...most specialists will fill your order, but the specialist on XOM seems fairly good in cancelling
  • Also, since this guy works pretty fast, if there is a large market order, he'll price improve the hell out of you! He'll move prices enough to absorb the market order, but then prices will often move right back
  • Since this specialist fills orders pretty fast, whenever the stock moves sideways, it gets really choppy because whenever there is an influx of buy orders, even before sellers can react, the specialist has either filled everyone already or he's moved prices accordingly...by the time sellers realize this, prices have already moved and as a result the sellers put in their sell orders (hence pushing prices back down)
Johnson & Johnson (JNJ)
  • When markets are flat or moving slowly, this specialist does the job just fine....
  • BUT, when the markets start moving fast, this specialist is slow as hell! Whenever the Futures move up/down fairly quickly, you'll see the orders come in on the Level II, but the specialist on this stock holds your orders for what seems like forever!
  • Often times, when I see the Futures pop up, I'd put in orders to get long...but the specialist takes his sweet time and as a result, either more orders come in ahead of mine (at prices that are ahead of mine), or the move in the Futures is already over and I no longer want the shares
  • I'd say the specialist on this stock is pretty bad when it comes to cancelling orders...whenever the markets move really fast, he tends to hold all orders that come in and I think the specialist prefers to have all orders that want to come in to come in so that he/she can fill everything in one print
  • I used to trade this stock a lot, but whenever I did and I had outstanding orders to be filled, I would often find myself saying (or screaming) "Do something already!", or "Print something specialist!!!", or "Well?? Are you going to cancel my order or not!!!!"
  • Price improvement on this stock was pretty good simply because the specialist often held orders for soo long that if the overall markets were really moving your way, the specialist would print at a price that reflected demand (by the time the specialist decides to print, they'd be an over-influx of either buy/sell orders)
  • I have since stopped trading this stock because it's more stress than it's worth
Advanced Micro Devices (AMD):
  • This specialist is also quite fast in filling orders and his/her speed can be compared to Exxon's
  • I'd say price improvement is only average on this stock
  • Because the specialist fills orders very fast, movements on this stock tends to be choppy...the reason is because if there is a sudden influx of buy orders, the specialist will fill them very quickly, before the sellers can react...once the sellers see that prices have already moved, they quickly put in their orders...as a result, you get a lot of up and down movements on this stock
  • If AMD is strong, then the movements are pretty good on this stock, but in sideways markets or slightly trending markets, this stock will chop you to hell (mainly because of the speed of the specialist)
  • As for cancelling orders...this one is kind of hit and miss - sometimes you'll get filled, but sometimes the specialist is kind enough to acknowledge your cancel order when things are moving fast

Anyways, this post is getting quite long, so I think that's enough for now.

With the Hybrid system coming in soon, I'm sure that the "personalities" described will probably change.

I don't know how useful the above info is to you (since most of you are probably longer term traders and not really concerned about how your order is executed), but I figure that this game is hard enough as it is already and any possible "edge" you can find is probably useful, right?

Good Trades
10:13AM - Motorola (MOT) was uptrending and so were the Futures. MOT had just broken the $25.00 level and when I saw an opportunity, I went long 5000 shares. MOT tried (fairly unconvincingly) to move up, and I got out as follows: 4-cent winner (3400 shares), 5-cent winner (1600 shares) ($216 profit before fees ; In: 10:13:54AM ; Long 5000 shares @ $25.05 ; Out: 10:21:55AM)

1:22PM - Motorola (MOT) was uptrending and testing the $25.50 level and the Futures were uptrending slightly. When the $25.50 level looked like it was going to break, I went long 5000 shares. After moving up a few cents, it looked tired and I felt uncomfortable, so I got my entire position out for a 4-cent winner ($200 profit before fees ; In: 1:22:29pM ; Long 5000 shares @ $25.50 ; Out: 1:25:47PM)

Bad Trades
None.

9 Comments:

  • Great results for a day like today, J.C.

    Thanks for the description of "personalities". I would very much like to hear your opinion of EMC's specialist.

    Continued good trading.

    By Blogger Mr Subliminal, at September 18, 2006 7:37 PM  

  • Wow, that was a good read. I'd add you to my site's blog roll, if you weren't already in it. :-)


    Only 88 trades? You must have felt like you had all kinds of free time, today! Did your peers still do their normal 400?

    By Anonymous Richard, at September 18, 2006 8:05 PM  

  • J.C.

    Very good blog, looking forward to read it everyday. I have a question, when you say net. Is it net to you or do you share a percentage of the net with swifttrade. Thanks!

    By Anonymous J, at September 18, 2006 9:53 PM  

  • To all,

    Thanks for the comments.

    Mr.Subliminal,
    Yes - today I found it rather tough as most of the stocks I was watching didn't really move at all. In fact, I was so bored, I left 15 minutes early...unfortunately a lot of traders were shutdown today...

    As for the EMC specialist...hmmmm..I have traded EMC quite a bit in the past, but I would have to rate him as pretty average, though it's harder to analyze some of the thicker and slower moving stocks. I think when I was trading EMC in the past, I had the feeling that the specialist absorbed shares quite often, thus limiting moves made on this stock. I have since stopped trading EMC because I found that it moved a little too slowly for my taste.

    Richard,
    Once again, thanks for the compliments. Yes - today was an extreme bore for me - I took an extra long lunch and most of the time I was just sitting there listening to my MP3 player...I had to take in double the amount of coffee this afternoon just to stay awake!

    Unfortunately, I think some of my peers did try to trade this market as usual and a lot ended up in the red or got shutdown. The guy who sits beside me traded only until noon before he got shutdown and he already racked up over 250 trades! He tried trading AMD in this directionless market and as stated in my post about AMD, he got chopped up too many times.

    J,
    Thanks for visiting! Unfortunately the net you see is before the split with swift...I just need to get my numbers a little higher before I feel comfortable with my take-home earnings...

    By Blogger J.C., at September 18, 2006 10:17 PM  

  • Nice post! I never really thought of stocks having personalities, but you've defined them so well that yeah, if you think about it, it makes perfect sense.

    By Anonymous EC, at September 18, 2006 10:35 PM  

  • EC,

    Thanks for the comments.

    I had never really thought too much about it when I was a trainee trading Walmart (WMT), but when I tried trading other stocks, I noticed the differences in execution speed and how the specialist handled certain situations. Hope you enjoyed the post and maybe in the future I might post up more "personalities" (though with the Hybrid system coming, I'll have to throw everything I've learned about the individual stocks out the window!).

    Happy trading!
    JC

    By Blogger J.C., at September 18, 2006 11:30 PM  

  • Hey JC!

    Nice trading today!

    Loved your post. I follow WDC quite closely, and can definitely say, stocks have personalities, and you can learn it if you put the time in....

    Tomorrow will probably be another aimless day, in fact I'm headed to the dentist. I have learned to schedule all of these kinds of appointments on the "pre-Fed day".

    :)

    Good luck, and good trading!

    Linda P.

    By Anonymous linda p., at September 19, 2006 12:24 AM  

  • Linda,

    Thanks for your comments.

    Definitely stocks on the NYSE have personalities - some good and some bad. If you're as active in trading NYSE stocks as me, you'll probably pick up these personalities and you can really get to know the stock and hopefully use it to your advantage.

    I really hate aimless, pre-Fed days...the thing I MUST do is to trade less during these days and take the opportunities only when they present themselves.

    Hope you have a good check up and happy trading!
    JC

    By Blogger J.C., at September 19, 2006 7:32 AM  

  • Hey JC - was wondering if you can give me your email, I am a former strictly scalping day trader (NASDAQ 1999 - 2003) and now I am trying to find new trading opportunities on NYSE - had some questions or if you could email me at tkaplun@yahoo.com

    By Blogger Teddy Da Russian, at September 20, 2006 7:08 PM  

Post a Comment

<< Home