Power Trading by Velez Oliver L

Author:Velez, Oliver L.
Language: eng
Format: epub
Publisher: John Wiley & Sons, Inc.
Published: 2012-09-20T04:00:00+00:00

If the market was biased to the upside, the market either goes flat during this period or tapers off. If the market was biased to the downside during phase one, during phase two it will either start to drift higher or go flat. The midday doldrums period is that very dangerous time for most microtraders. We tell most microtraders to go to lunch because this is historically the flattest time of the day. There is a very good reason why this period lacks a great deal of excitement or volatility. It’s simply because the majority of the big boys on Wall Street go to lunch.

I’ve spent a great deal of time down on Wall Street. I was an accountant as my first profession. But I was frustrated because of my dream to become an astute market player. I would take my brown bag lunch (I worked for a law firm on Wall Street in the accounting department), and I would go down and sit at the doorstep of JP Morgan, right down the street from where I worked. I’d watch the powerful players come out of the JP Morgan front doors. You could always spot a market maker, which is what I wanted to be. You could always spot these powerful players who walk with phenomenal confidence.

When I started to delve into the market and learn about some of the intraday tendencies, I learned how this excessive volatility in the first hour-and-a-half represents phenomenal microtrading opportunities. I also learned that at a certain time, the market just goes flat.

What’s interesting about this time frame is that most market making desks are populated by two traders. There is one senior trader and one junior trader.

It’s the senior trader who handles the institutional clients. When an institutional client calls the desk and says, “You know what John, I need 48,000 shares of ALTERA by the end of day today. You work it at your discretion,” the senior market maker handles that order. This client is responsible for a lot of commissions and a lot of business to the firm. So, only the big man handles this order.

The “doldrums” can be a difficult time for most traders unless you understand what you’re doing. Most traders give back gains during lunch.

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