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When I first started to utilize SOES for trading back in 1988, it was relatively easy to spot trends, enter quickly, and exit profitably. A handful of traders represented the entire SOES trading community, and competition between SOES traders was virtually nil. The only opposition was the leading market-making firms; unfortunately they comprised the major committees of the NASD, which passed numerous rules and regulations restricting SOES trading. Since 1988 I have been the primary advocate fighting for the individual rights of the DAET trader. |
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Today, the NASD and its regulatory attitudes have changed and are easier to live with than they were. Changes in the rules have encouraged many more people to trade electronically. It is generally more competitive to DAET/SOES-trade now than it was in 1988 due, in large part, to the increased number of participants vying for the same stocks. |
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Having more DAET participants has led to the phenomenon of significantly more "wiggles and jiggles and head fakes." For example, when several DAET traders decide to buy Intel at the same time, several market makers might move up their quotations as they each sell a small quantity of shares. Other market makers will copy the actions of the first market makers and move their price quotation, without even making a print (trade at their quoted level). Market makers have begun to realize that when DAET traders come in to buy shares, it is only a matter of time (usually only a very short period) until they will be offering to sell back those very same shares. Knowing this, several of the more astute market makers will start to "fade the trend" (sell into the DAET buyers) and then downtick the stock, causing DAET traders to maintain discipline and sell out. This type of action creates what I call "wiggles and jiggles." Stocks go up (or down) a small amount, stop, and reversesometimes several times a day. This type of action can drive DAET traders nuts. |
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There are defensive measures DAET traders can use to counter wiggles and jiggles. The proliferation of many DAET |
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