Don’t you hate not knowing where the bottom is on a stock? I don’t. Wall Street doesn’t. Most individual traders think they can just look at a stock quote and the technicals on a stock and have a good idea of where the bottom is. We take the guess work out of it.
Like I said, you look at your stock quote and see the bid and ask price to see which direction the stock is favored to move in. Then you look at the technicals of the stock and figure out if there is resistance or support in one direction or the other. I, and Wall Street, use something called level 2 trading. Most trading firms charge you extra for level 2 trading access. What is level 2 trading? Well, it lays out what orders have been placed on an individual stock. It tells us how many shares are being bought or sold, at what price, and by whom. So I can easily look at a stock and see that there are 50,000 shares with buy orders at say $5.00 and only 1,000 shares with sell orders at $5.03. I can also see that the next sell order after those 1,000 shares have been sold is for 60,000 shares at $5.05 per share.
What does all that mean? It means I know it is much easier to sell 1,000 shares of something before 50,000 shares can be bought. In the scenario above, the stock is most likely to move up to $5.05 and hit at least a momentary point of resistance. Again, it would be easier to buy 50,000 shares of something that it would be to sell 60,000 shares of something.
We take the guess work out of it. We don’t have to look at the technicals and make estimations. We can look at our level 2 trading platforms and place our orders accordingly. Meanwhile, the individual investor doesn’t know what orders have been place, at what price, for how many, or by whom. We take advantage of that knowledge on a daily basis. Yes, all at the cost of you, your retirement, and your children’s education funds. What does Wall Street care though? We’re paid to make money, no matter who we screw…