Order-Routing System

In the previous pages you were introduced, by description, to the

order-routing box that sits at the bottom of a Nasdaq Level II market

maker screen. This is the most important part of your trading configuration.

The design and function of this box will depend on your

electronic trading firm. As I have stated before, not all electronic

brokers are the same. In fact, another individual could be using the

same basic software as you, but the look, feel, and function of

the screens are different. Software manufacturers make deals with

the major electronic trading companies to customize software with

their name or a product name. The software is the same, but incorporates

the look and function that a particular electronic trading

firm wants to offer its clients. Take a very close look at the orderrouting

system you are offered because the ease and speed of use

will in many cases make the difference in getting or missing a trade.

You do not want a cumbersome, time-intensive, order-routing system.

Another problem with online software is that it simply takes

too long to enter the information and route the trade. Let us examine

a very powerful order-routing system. Figure 2.5 shows an example

of an efficient order-routing system and a brief explanation of

the features.

You now have an understanding of the components that make

up electronic trading and a clear idea of how much power flexibility

this type of trading offers. Once the general public understands how

1. Margin: This area identifies the trade as a margin or cash nonleverage trade.

2. Price box: There are two ways of entering a price into the price box. The first is to

simply place the pointer on any price you select on the bid or the ask side of the

screen and click the mouse. The price will appear in the price box. If you want to

raise or lower the price by fractions of a point you can use the up and down buttons

located to the right of the box. This enables you to make small adjustments to the

price very quickly. The second way of entering price is to use the computer keyboard

and type in the price of the trade.

3. Order type: This box is used to identify your order by clicking on the arrow at the far

right of the box. When you click on the arrow you will be able to select a limit order

or a market order. If you are routing using Island, you will want to use the limit identifier.

A SOES order may be either limit or market depending on what you are trying

to accomplish.

4. Number of shares: Enter the number of shares by typing the number into the space

available. You can make changes by using the increase and decrease button at the

right. Make sure you have selected the correct number of shares before you route

the trade. If you want to buy 1,000 shares, you do not want to fire off an order only

to see 10,000 in the box. One extra zero is all it takes.

5. Part or all: This identifies that all or part of the order must be filled. In most cases

you will leave it as part. If you order 500 shares, using part may fill 300, then complete

the order with 200.

6. Route: The route button selects the route of the trade. By clicking on it you can

select from several ways to route your order. This information is critical when

momentum increases or decreases. Knowing the correct route will enable you to get

out or in on a timely basis. You will be routing to ECNs, SOES, and Super DOT using

your member association.

7. Expiration: This identifies your order as a day order, good-till-canceled order, or

whatever. In most cases you will have the expiration set on a day when you are

intraday trading.

8. Buy button: This button is used to buy long stock or to cover (buy back) short stock.

9. Sell button: This button is used to sell long stock or to short sell.

electronic trading 33

10. Cancel button: This button is used to cancel all orders on the Nasdaq, NYSE, or

AMEX. This button is very important to all traders. You need to have the ability to

cancel your trades quickly.

superior electronic trading is compared to online trading, they will

demand it.

Technology is useless without an understanding of how to

apply trading strategy. In Chapter 3 we will discuss useful market

information and take a look at several trading strategies that can be

used by day traders, microtrend traders, and position trend traders.

In the previous pages you were introduced, by description, to the

order-routing box that sits at the bottom of a Nasdaq Level II market

maker screen. This is the most important part of your trading configuration.

The design and function of this box will depend on your

electronic trading firm. As I have stated before, not all electronic

brokers are the same. In fact, another individual could be using the

same basic software as you, but the look, feel, and function of

the screens are different. Software manufacturers make deals with

the major electronic trading companies to customize software with

their name or a product name. The software is the same, but incorporates

the look and function that a particular electronic trading

firm wants to offer its clients. Take a very close look at the orderrouting

system you are offered because the ease and speed of use

will in many cases make the difference in getting or missing a trade.

You do not want a cumbersome, time-intensive, order-routing system.

Another problem with online software is that it simply takes

too long to enter the information and route the trade. Let us examine

a very powerful order-routing system. Figure 2.5 shows an example

of an efficient order-routing system and a brief explanation of

the features.

You now have an understanding of the components that make

up electronic trading and a clear idea of how much power flexibility

this type of trading offers. Once the general public understands how

1. Margin: This area identifies the trade as a margin or cash nonleverage trade.

2. Price box: There are two ways of entering a price into the price box. The first is to

simply place the pointer on any price you select on the bid or the ask side of the

screen and click the mouse. The price will appear in the price box. If you want to

raise or lower the price by fractions of a point you can use the up and down buttons

located to the right of the box. This enables you to make small adjustments to the

price very quickly. The second way of entering price is to use the computer keyboard

and type in the price of the trade.

3. Order type: This box is used to identify your order by clicking on the arrow at the far

right of the box. When you click on the arrow you will be able to select a limit order

or a market order. If you are routing using Island, you will want to use the limit identifier.

A SOES order may be either limit or market depending on what you are trying

to accomplish.

4. Number of shares: Enter the number of shares by typing the number into the space

available. You can make changes by using the increase and decrease button at the

right. Make sure you have selected the correct number of shares before you route

the trade. If you want to buy 1,000 shares, you do not want to fire off an order only

to see 10,000 in the box. One extra zero is all it takes.

5. Part or all: This identifies that all or part of the order must be filled. In most cases

you will leave it as part. If you order 500 shares, using part may fill 300, then complete

the order with 200.

6. Route: The route button selects the route of the trade. By clicking on it you can

select from several ways to route your order. This information is critical when

momentum increases or decreases. Knowing the correct route will enable you to get

out or in on a timely basis. You will be routing to ECNs, SOES, and Super DOT using

your member association.

7. Expiration: This identifies your order as a day order, good-till-canceled order, or

whatever. In most cases you will have the expiration set on a day when you are

intraday trading.

8. Buy button: This button is used to buy long stock or to cover (buy back) short stock.

9. Sell button: This button is used to sell long stock or to short sell.

electronic trading 33

10. Cancel button: This button is used to cancel all orders on the Nasdaq, NYSE, or

AMEX. This button is very important to all traders. You need to have the ability to

cancel your trades quickly.

superior electronic trading is compared to online trading, they will

demand it.

Technology is useless without an understanding of how to

apply trading strategy. In Chapter 3 we will discuss useful market

information and take a look at several trading strategies that can be

used by day traders, microtrend traders, and position trend traders.