I was trading the Betfair betting markets some years ago and my technique was towards scalping, so reading about an interview of a stock scalp trader sounded interesting. However I was totally shocked of what the stock scalper confessed in that interview given to the popular community web site for traders, trade2win.com. I was so amazed that I no longer wish to open a trading account overseas. I might have taken a shot at the US Level 2 stocks, or try scalping foreign financial markets, but he has convinced me otherwise. If you read the interview, you would probably be persuaded as well!
I always find exciting to read about other gamblers’ achievements. In general, reading about the life of another gambler results in finding a lot of common things with mine. Those kind of stories are rarely heard and are not that popular, so whenever I am lucky to bump into one, I make sure I have at least a peak. This time however was more than a peak since during my reading, I found out that it is not such a fair competition after all. I may be wrong and have misunderstood, but whatever is the truth I am nowadays much more reluctant in investing in stock markets.
The interview of the stock scalp trader is a long one but in the middle he mentions:
“I still have to pay because my route allows me to bypass the thickness in the book and I route it straight out into the NYSE floor where there is a specialist who tries to match my shares.”
Note that the “thickness in the book” is actually the depth of market, or rather the queue of orders! After a bit of explanation, the interviewer himself wonders:
“You said you can actually bypass the order book queue so by that, and correct me if I’m wrong here, but you’re saying that if you’ve got six or seven levels of orders being shown on a level two screen, and you’re at the seventh or eighth level, you could get filled quicker than the people above you.”
Now, imagine my face expression when I first read “bypass the order book queue” and then the trader’s simple answer “Yes”! If you ask me, that is totally unfair in my book. But since I’m not a US stock trader I couldn’t care less. However, that got me thinking about the Betfair order book queues. If you have followed my blog the last years, you know now that I have stopped trading in Betfair since I couldn’t win any more. I did make money for about 2 and a half years trading the horse racing betting odds prior to the start of the races. I never traded in-play and made a profit every month starting from July 2005 to autumn 2007. In late 2007 and in the beginning of 2008 I obviously couldn’t make it pay any more as it seemed I was constantly a tiny fraction of a second slower than others. Therefore, I quit.
I blamed the other traders for being quicker than me. I also blamed them for improving their trading skills and being able to pinpoint the trends better than me. I finally blamed my internet connection’s speed since internet speed does affect trading. But I never ever thought of someone being able to bypass the order book queue. Because if I thought of that I would given up much faster.
Today I am being naive and still don’t believe it can be done. Remember, I’m always speaking of bypassing the queue prior to the start of a game. Whatever happens in-play and whether someone has faster pictures than Betfair is irrelevant to me. But what still shocks me is what the US stock scalp trader made known to public via his interview. I assure him that he has persuaded me never to risk my money scalping the US markets!