Can you be quicker than the market?

[lamot1]

Hi all, a somewhat hypothetical trading scenario I have been thinking about: Is it possible to react to a price sensitive announcement before the majority of the market?

For example, if I was to monitor the ASX website for a new (say positive) price sensitive announcement could I then quickly place my trade through an online broker to capture a significant proportion of the rise before selling out again later that day at a higher price? The largest delay I find is the 10 or so minutes it takes for my order once placed to go from "Processing" to "In Market".

My interest was piqued in following FDL recently for a couple of hours from the moment of the FMG announcement. It appeared to me that the price remained below 0.03 for a brief 15-20 min period before taking off. Are delayed Comsec prices creating this illusion, and if so where can I get more timely price data? Also can a retail online investor match or beat the speed of professional stockbrokers in executing buy or sell orders?

 

[prawn_86]

Theoretically it can be done, but there are a number of questions:

How do you tell a positive announcement?

What if that announcement has already been factored into the price and it stays steady or even drops?

At what point do you sell? ie - FDL im sure a lot of people would of sold out at 10, 20 even 100% only to watch it keep going


IMO its best to stick to companies you have researched well, but thats just my style because i suck at short term trading!

 

[Timmy]

prawn_86 makes some excellent points, especially for a crustacean , can I add a couple more.

Is it possible to react to a price sensitive announcement before the majority of the market?

You could give it a try, you will be in competition with others trying to do the same thing so make sure you have the best information feed possible and the best order execution platform possible.

The largest delay I find is the 10 or so minutes it takes for my order once placed to go from "Processing" to "In Market".

10 minutes is a delay of monumental proportions with what you are trying to do.

where can I get more timely price data?

Brokers would be the first choice. Then there are other services that offer live ASX price data: I wont plug any here but if you Google it you should find some.

Also can a retail online investor match or beat the speed of professional stockbrokers in executing buy or sell orders?

Unlikely, especially if the professional has the information before it is released to the public.

 

[lamot1]

How do you tell a positive announcement?

What if that announcement has already been factored into the price and it stays steady or even drops?

At what point do you sell? ie - FDL im sure a lot of people would of sold out at 10, 20 even 100% only to watch it keep going

For the purpose of this thread let's assume that the announcement will result in a significant price rise. I am more interested in the mechanics of whether it is possible to act faster than most from my home computer

 

[prawn_86]

For the purpose of this thread let's assume that the announcement will result in a significant price rise. I am more interested in the mechanics of whether it is possible to act faster than most from my home computer

Sure can.

I use a cheap/budget broker and yet my trades still go through instantly if i order them 'at market'. If i had all my screens open, after reading an ann i liked to having the order complete 'at market' would prob take no more than 30seconds depending on how quickly i typed my quantities etc.

So IMO that side of things is not a problem its picking the right announcement that you would struggle.

 

[>Apocalypto<]

Can you be quicker than the market?

Yeh if you have a time machine, but is there a future if we have not gotten there yet, don't our actions today create tomorrows future.

 

[Absolutely]

I've tried it a couple of times and have gotten seriously burnt each time.

It is very difficult to know how the market is going to react. Seemingly good announcements can bring the price crashing down becasue the expectation was probably higher or the buy on rumour scenario etc...........

Really can't recommend this approach.

 

[bvbfan]

Problem with this strategy is that whenever a price sensitive annoucement is made by a stock, the company is usally halted and placed in pre open for 10minutes so the market can digest the information.

The ASX site does seem to have the announcements a minute or two before ComSec Protrader but if its in halt it will only help you get an spot in the queue before someone else. And if someone is going to bid over you then what?

Also numerous times I've seen stocks sell off after a good/great annoucement, or rise after a bad/terrible announcment (although a bit rare)

 

[Timmy]

A point that keeps cropping up is the market responding in an opposite direction to what would be expected, i.e. “good” news is then followed by a sell-off – “buy the rumour, sell the fact” has also been mentioned. I think this is very important. The positive announcement may have been “anticipated” (this is my code for inside trading, but of course this doesn’t happen…) and so profit-take selling occurs into the post-announcement euphoric buying.

I know you said, lamot1, that you are more interested in the mechanics of the situation, and this has been covered well in the responses too, but it may be worth considering this “buy the rumour, sell the fact” phenomenon also.

 

[steven1234]

I think the situation he is hoping for is one where he can take advantage of all the remaining sell orders prior to them being pulled or raised to the next level.

I tried this once and kept having to chase the price up. By the time i placed my order the sell orders i was hoping to get had already been filled by others. It did work though and i got in and bought up while the market took time to digest and read the announcement.

With all the real time info available, eg sms alerts etc its not too hard (if you are in front of your computer) to take advantage of this info, but you never know how the rest of the market will react, and any major moves usually have a trading halt prior.

For those of you that are quicker than the market, i think there is some nasal delivery technology available that can help you with that problem....

 

[Timmy]

For those of you that are quicker than the market, i think there is some nasal delivery technology available that can help you with that problem....

LOL - like it!

 

[nioka]

The largest delay I find is the 10 or so minutes it takes for my order once placed to go from "Processing" to "In Marke?

I've timed myself in getting an order placed and it is usually 30 to 35 seconds from deciding to trade to having the trade placed in the queue or completed if "at market" or at my price if here is a corresponding buyer or seller. It can take 10 minutes sometimes first thing in the morning if the request is "referred", which can happen if I am outside the probable trading price range.

 

[Spaghetti]

Lamot

I make most money this way. The market will wait until there is proof of price rise, then more traders will join in when volumes increase.

To be in first though you have to recognise a good announcement and give it the correct amount of time. Then have the ability to do a 3 minute valuation.

Because I only have knowledge in small areas it means I don't get in early on very many but when I do usually for huge gains.

On stocks I do not have an understanding of I jump on like everyone else, when reaction is confirmed.

I find if I buy early in an area I understand I may still make a few% but not lose very often even it it fails to fizz !

So my advice to do this specialise ! Hot commodites are best...eg Iron Ore and now Gold maybe next big thing.

Do study the real value but also the marketing value. Some stocks go high on really ordinary announcements but the way it is worded can fool the masses.

 

[Arturius]

If only the market was as simple as good news = prices go up, bad news = prices go down.

The problem is, this has nothing to do with supply and demand, which determines prices. There's a million other factors at work. Understanding the context of the news however is a good way to trade, but its extremely difficult to digest all the information fairly.

 

[Timmy]

Lamot

I make most money this way. The market will wait until there is proof of price rise, then more traders will join in when volumes increase.

To be in first though you have to recognise a good announcement and give it the correct amount of time. Then have the ability to do a 3 minute valuation.

Because I only have knowledge in small areas it means I don't get in early on very many but when I do usually for huge gains.

On stocks I do not have an understanding of I jump on like everyone else, when reaction is confirmed.

I find if I buy early in an area I understand I may still make a few% but not lose very often even it it fails to fizz !

So my advice to do this specialise ! Hot commodites are best...eg Iron Ore and now Gold maybe next big thing.

Do study the real value but also the marketing value. Some stocks go high on really ordinary announcements but the way it is worded can fool the masses.

Spaghetti - can I ask you please, what sort of timeframe would you be holding the position for, if it was going your way (I assume if it doesn't go your way you are stopping out very quickly)? I assume it would be "momentum" trade, are you looking for a quick turn and taking profit if it shows signs of weakening (assuming initial position was a buy) or are you trailing a stop and looking more for a trend trend? Or a bit of both? Sorry if this is an intrusive question but just trying to get a picture of your philosophy on the trade, not the specifics.