Here's How To Use The ECN's To Get A Better Fill

The chart below is a great example of finding the strength in the markets. I come in every morning with as little bias as possible. I attempt to find the opportunities that the stock markets present. I know the indexes have been down, but I try to not let that cloud my evaluation of a stock setting up for a move to the upside.

My scanner was developed to search for specific situations occurring on a universe of stocks. It performs these searches in real time and outputs stock symbols as the criteria for the specific situations are met.

This morning Altria Group (MO | Quote | Chart | News | PowerRating) began showing up on my Scanner as exceeding its’ 52 week high and as having very large bids appearing on the NYSE. My first trade was to buy some stock that was offered on an ECN beneath the NYSE offer. This can happen as the person offering the sale is not quick enough to remove the stock from the offer. I can then turn around an sell the stock on the NYSE for a quick profit. This requires quickness. It is not a guaranteed profit, but most of the time it will work if big bids are present on the NYSE.

I started to trade the stock in a rapid fire manner as it moved higher, unsure what was behind the strength.

The second major trade of the day in MO is highlighted on the chart below. As it approached the price of 70, there were large offers on the NYSE. I decided I would go long if the offers were taken out. Since it is options expiration week, my assumption was that many options players would defend the strike price on this large unexpected price jump in the stock. If their defense failed, my guess was that there would be a ramp up in price as they moved to cover their losses.

My reasoning played out and the price moved up to just over $71,00 a share. My trailing stop took me out for a $1.00 gain.

(Time shown is PST)

Not all trades work out so well, but being prepared to take advantage of them as they occur, at least gives me the opportunities.

Michael Kestler is a full-time professional trader and managing partner for Evolution Capital LLC., a proprietary trading firm. Mr. Kestler specializes in intraday trading of NYSE listed stocks.

Before founding Evolution Capital LLC., Michael began his career on the floor of the CBOE. Mr. Kestler was previously a Mid-Cap and Nasdaq Market Maker.

You can contact Mike at mike@evotrading.com