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What trading technique (style) will you employ? Although from the outside most DAET traders look the same, subtle differences exist in every trader's style. Basically, all you do is identify a trend, enter, wait for the anticipated move to occur, and then close out accordingly. Seems simple and basic, but within this "simple" scenario are many possible variations, variations that can make major differences in your profitability. There are several techniques you can employ; all will work with varying degrees of success. The most important thing is to be consistent with whatever style you choose, rather than continually changing. |
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Market-Maker-Style Traders |
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The earlier methods of trading focused on momentum trading techniques. Since the implementation of the SEC Order Handling Rules in January 1997 and the proliferation of ECNs and access to them through DAET, new techniques are available which can be employed to enable profitable trading. Most of these techniques will allow the successful trader to prosper by applying market-maker techniques that were formerly the exclusive domain of the brokerage industry. |
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Simply stated, the results of the SEC's Order Handling Rules and the implementation of the ECNs have made it simple and efficient for traders to initiate quotes and/or trades. Previously, brokerage firms had no obligation to reflect your limit orders (quotes) in the national market mechanism. In addition, your broker could take several minutes to execute your order against a quoted price. |
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Today, initiating quotes and trade executions is virtually instantaneous. Limit orders that improve the inside price must be displayed to the entire world. Initiated quotes are now nationally disseminated, and the completion of customer trades against firm quotations has come down to a mere mouse click. Since the act of trading involves initiating trades by hitting quoted bids and taking quoted offers, all strategies must operate within this framework. The logic behind trading can be varied, but the implementation of a trade must be done before one can expect to make (or lose) money. |
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