A Note to Traders on the Absence of Liquidity

BellaMike Bellafiore's (Bella's) Blogs3 Comments

SMB Traders,

The last two trading days have been the worst liquidity I have ever seen. Obviously the huffiness on the desk is high. IMO is should be. I have not been this mad on a desk in three years myself trading this ridiculous market.

The market is broken. And some of these moves are absurd.

Having said that GMan was still able to post almost (deleted because of BD rules) in P&L. And as long as we can hit the bids and pay the offer then we can make money. As traders there is no right to an orderly market.

Trading is a privilege!

The truth is the more movement intraday in stocks the more opportunity for us. Let’s agree on one thing first:

1) Let’s end the complaining and just accept this is the market and that is the way it is. And now how do we capture some of the new patterns being created by these low volume wicks?

Some solutions to consider:

a) trade smaller
b) scalp
c) if you get stopped out on a low volume wick, get right back in
d) set alerts for exits and then manually exit
e) fade wicks to the upside of stocks clearly in a downtrend. and play for a return to the mean
f) if you get pissed take a mandatory ten-minute time out
g) trade significantly less on the open or not at all
h) limit the number of stocks you are trading

The market will probably correct soon as algos will be introduced ending the low volume liquidity. But if not then no matter. We then will just have new patterns to exploit.

Thoughts?

Bella

no relevant positions

3 Comments on “A Note to Traders on the Absence of Liquidity”

  1. Bella,

    As traders, we must adapt. At what point should we look to other markets (FX for example)? Is our attachment to equities just an emotional one? Are the opportunities present in other markets more attractive? How difficult is the transition (equities to FX)? I have noticed smb sending more emails with regards to Forex. Persistence seems like the obvious answer but that scares me a little.

    I’m still seeing opportunity but one must be much more selective, imo. After reading your book, I know you have seen mother market make many changes. Being a newer trader, your perspective is very helpful.

    I greatly appreciate your insight.

    Michael W.

  2. Bella,
    I have been having guys concentrate on 2nd and 3rd day plays on the open where there is a better chance of resting orders or the book populating quickly. I have been really incorporating the bigger picture plays and some simple strategies that have worked throughout the years I have neen trading. Our job as career day traders is to adapt not complain as you stated. As a day trader a huge part of my edge is being able to decide and participate when the proper conditions are at hand. I dont get paid by the hour but by the trade. Young traders need to learn that when your risk cant be controlled then you are just gambling. To be a pro the risk side is always determined before the reward side.

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