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See the signs and messages they send each other
Many traders believe
that Market-Makers (MMs) will
"signal" moves in advance buy using
small amounts of buys or sells as
"signals". The "signals" are from one
MM to another.
I need shares.
I need shares badly, but do not
take the stock down.
Take (or I am taking) the price down so I can load
Keep trading it sideways.
Gap the stock.
This is a theory put forth by a lot
of penny stock and non-penny stock traders. This is not
a guaranteed trading method but can
lend some insight to
communications. It can pay to watch
a few MMs of your favorite stock
over several days or weeks to see
if they follow these or other
similar signals. That way, you can
divine what they are going to do
and jump in ahead of any move that
QUADRUPLE PLUS - LAST WEEK (August
Picked @ $1.63
395% Gain In Just Weeks
Why signals? Why not just
message or email?
One simple reason...
calling/emailing one or more of the
other MMs and telling them to
going to gap the
be 100% ILLEGAL. Collusion at it's
finest. If caught, handcuffs could
replace their Rolex for a trip
We've worked on
OTC/Agency (Nasdaq and OTC-BB) desks and
worked with many actual MMs. We can
attest that many MMs will use certain
signals. Some will
bids/offers to trick individual
investors and day traders. They are still
responsible for those bids/offers and would have
to buy or sell there if their bid or offer
is hit, but they post those to make others think
they have an order and do not really want to buy or sell
When 100 Actually Means 25,000
When watching larger stocks, market makers from large firms will often bid for 100 shares when they actually want several thousand shares.
Market makers are in the game to make money as well as execute orders for their firm's clients.
If you do see a huge bid or ask - thousands of shares where it's not usual it's often a fake. That is, they really don't want to execute that trade but are actually trying to scare others and to move the stock the opposite way that their bid or ask would indicate. If the stock happens to trade closer and closer to that larger bid or ask, it will disappear. Smaller stocks and penny stocks are rife with that type of dishonest manipulation on OTC markets.
Market makers will almost never show their hand to let others know what order they are working. For instance, let's say a market maker for at a major firm receives an order to purchase 25,000 shares of a stock at a $5.00 limit for an institutional client. He will never bid for the full 25,000. He will place a 100 or 200 share bid at $5.00 or lower. Why? If the market maker places all 25,000 shares at the bid at $5.00, another market maker with shares to sell could "hit" that bid and sell him everything at $5.00. The trade is over; the bidding market maker has just bought all 25,000 at $5.00. However, using smaller bids and some patience will usually mean he can get shares a bit cheaper. With a 25,000 order, a difference of just a few cents can result in thousands of dollars.
The market maker with the bid will put up only 100-200 to see if any fish bite. If they do, he'll remember who sold him those and move his bid down to $4.95, $4.90, etc. and see if he can get more there. If he does, great, he'll keep working the price down as far as he can go to get the shares as cheaply as possible.
Perhaps he now has 25,000 shares with an average price of $4.80. Now that the market maker has 25,000 shares, he can then sell them to his customer at $4.90. At $4.90, the customer is happy because he would have paid up to $5.00 and the market maker is happy because he sold the shares to the client $0.10 higher than it cost him and he made a tidy profit of $2,500.
Market makers will almost never post a bid or ask for more han just a few hundred shares no matter how large their true need is. So if you do see a market maker from a large firm posting a bid for 500 shares, there's usually thousands of shares behind that. Unless he's selling signals and not selling just stock.
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