Interesting read on MM's Market Millionaires Stoc
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Posted On: 03/25/2014 8:45:15 PM
Interesting read on MM's
Market Millionaires Stock Market Investment Forum > Stock Market Chat > Market Discussion > Some MM explaining please
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Ax - one market maker that seems to control the supply/demand of a security or
stock
Convertible Debenture (CD) - Debenture which can be converted into stock at
the option of the holder and/or the issuer at a specified date in the future.
Because the buyer has the ability to convert the debenture into stock under
certain circumstances, the seller is able to borrow at a lower cost than if the
convertibility feature was not present.
ECN (Electronic Communication Network) - an electronic system that brings
buyers and sellers together for the electronic execution of trades. It
disseminates information to interested parties about the orders entered into the
network and allows these orders to be executed.
MM – market maker
S-8 - are paid out for services
SB-2 - are sold by company (Optional form for the registration of
securities to be sold to the public by small business issuers)
TOP 5 IMPORTANT MMs or wholesalers/retail (typically out of dilution):
NITE, GVRC SCHB, TDCM, GNET
Examples of wholesalers: HRZG, MASH, NITE, SHWD
Examples of ECNs: ARCA, BRUT, BTRD, INCA, ISLD, REDI
Top Dilutors (retailers): ACAP, AGIS, BAMM, BMIC, CHIG, CLYP, FANC, FRAN, JIMK, MAYF, PERT, SACM, UCAP, VERT, VFIN
Monthly share volume report is indicating the MMs and how many shares they bought/sold (it is a month delayed)
Important (on Level II)
1. to see who the players are
2. and who to watch for
Axes basically is main MM that is either supporting the bid or opposite
(hitting the ask).It is the party who seems to be controlling the action in the
stock. Also when a stock is dumping S-8 shares he will be consistent on the
ask. Once he jumps and starts supporting bid => S-8 close to being over => MM
movement is big.The ax isn't always trading the stock in one direction or
another. Sometime he is keeping it in a tight range. And sometime he is not
there at all. Another ax may step forward, but there are times where there is
no ax present doing anything of note.The point is the ax is the one to watch,
closer than all other parties or MM's. When you learn to trade with the ax
your odds greatly increase.
So how do we find the ax????????
The best way to find the ax is through familiarity of the stock. By taking the
time to watch the stock trade via Level II the ax will usually become quite
apparent. But since we want info now and not wait days to find out there's a
shortcut. It's no substitute for watching the action, but it can at least give
you a lead on a few parties to watch closer than others or MMs. Key = Monthly
Share Report!
Generally look at the top 3-6 spots on the report. I tend not to count
wholesalers at all as market makers. I also don't count ECNs as any number of
players can use an ECN (TRAC, DATA). I will also throw out retail ECNs like
GVRC for similar reasons as just mentioned, and also since most of the traffic
is retail. We are getting rid of unnecessary MMs. Plainly it just doesn't
happen where a little guy is going to control a stock. So that's why we
narrow selection.
One, the ax is not static. On any given day any party can be an ax. Heck, there
may be one ax in the morning and another in the afternoon and neither of them
could be listed in the top ten of the monthly share volume report. If a big
order comes onto the trading desk of a firm that doesn't do big volume in a
certain name the firm will need to work that order. And if no one else is doing
anything of consequence in the stock this new party will command the action.
An ax can easily use an ECN to hide much of their action. They can and will use
fake outs.
IMPORTANT:
Keeping a keen eye on Level II will reveal these things.
Monthly Share Reports and Level II patters are the key.
Watch the Level II and they use monthly share volume for confirmation.
Example of an ax who is selling:
When the market is rallying, the stock has a hard time moving higher, seemingly
hitting a wall every time. And every time the wall seems to have the same
initials and yet, when the strength subsides, the stock has no trouble falling.
And funny enough, the ax seems to be following the stock down. That's where
Level II comes into play. You have now found the missing link per se. You can
see around the corner and start to see patterns.
MM AX is on ask - it means he is driving price down - not good for us because
we are buying and not shorting the stock (can't short OTCBB).
Example of MM supporting PPS stock northward:
Let's say that a stock (shell) has been lying quietly at $.25 bid $.50 offered.
A limit order comes into one of the MMs to buy at $.50 for a thousand shares.
Prior to this trade that MM may be "flat" (neither long nor short any shares).
He fills the order and is now short 1,000 shares. He may raise his bid hoping
to find a seller to "flatten" out his position. But before he realizes it a
wave of buyers have come in and cleared out all the $.50 offers. Now the stock
is $.50 bid .75 offered. Here comes that "Big" firm he just sold the 1,000
shares to at .50 with another bid for 1000 at .75. He makes this print. Now he
is short 2,000 at an average of .625. The market keeps moving and now its .75
bid 1.00 offered. Now he has to make a decision. Just like investors, MM Hate
to take a loss. So 9 times out of 10 he will now sell 2000 at 1.00 making him
short 4000 but with an average .81. At this time he would love to see a seller
at .75 so he can cover his short and make a few but instead the market keeps
moving up. Now it is 1.00 to 1.25 and here comes the buyer again at 1.25. He
doesn't want to lose the call so now he needs to sell 4,000 at 1.25 to keep his
break even point above the bid. Now he is short 8,000. Market moves up to 1.25
bid 1.50 offer here comes the buyer now he feels he must sell 8000 here because
"stocks don't go up forever". Now he is short 16,000. And so on and so on. If
the stock keeps moving up, before he realizes it he could be short 50k or 100k
shares (depending how big his bank is). Finally the market closes for the day
and on paper he may look all right in that his "break even" price may be around
the closing price. But now he has to figure out how to entice sellers so he can
cover this short. It is important to note that if this happened to one MM it
has probably happened to most all of them.
IMPORTANT
Some ways MM's entice sellers:
1. Run the stock up with a "tight spread" in a fast market, then "open" up the
spread to slow down the buying interest. After it has "cooled off" for a little
while lower the offer below the last trade right after a small piece trades on
the offer then tighten the spread so that the sellers feel they can take a
"quick profit" by "hitting the bid" on the tight spread. Once the selling
starts the MM's will walk it down quickly by only making small prints on the
way down with the tight spread.
2. Another way is by running the stock up in the morning, averaging up their
short then use the above technique to walk it down in the afternoon. Hopefully,
after doing this for several days, it will demoralize the buyers. The volume
will dry up and the sellers will materialize thinking that the game is over.
Contrary to popular opinion, MM usually Do Not Cover in Fast moving markets
either Up or Down if they are short. They Short More. They usually try to cover
after the frenzy is out of the market. There are many other techniques they use
but the above are the most popular.
These techniques work about 9 times out of 10 particularly in a BB market.
However, that is because 9 out of 10 BB stocks are BS. Remember what I said
above. Most MM's don't have a clue as to the value of a Company until they get
trapped.
Example:
The ax seems to be following the stock down. Ax is killing stock on ask.
Question: If this behavior is recognized what would be the appropriate course
of action? Going long the declines or selling the rallies?
Answer: selling the rallies. Since we can't on OTCBB and Upside is limited
every time the stock tries to advance. Instead of trading against the ax and
hoping that the buyers will overwhelm him, it is much smarter to sell with the
ax and watch the stock fall as buyers pull away. Hence you would short it. The
only kind of buying which should be going on is the covering of short positions
as necessary. Work with the ax to your advantage.
Example: RWNT (trying to find dilutor):
Input RWNT into monthly share report. Remember focus on top 3 -6 spots. Don't
count wholesalers. VERT is the dilutor. Explanation: Look at April. Then look
at May. Nothing in April. Then he dumped 57mil shares in May. You can even go
back to March and he wasn't even a listed MM. So he came on in April and then
he started his selling.
Keep in mind that RWNT is extreme and you're not always going to see that.
S-8:
S-8's - you need to read filings and see exactly what they are for some s-8's
actually aren't bad some are employee stock options etc. MM can remain on the
ask for months, however long it takes to fulfill S-8 shares. They don't care
what price they get.
S-8's are great tools to watch and learn how an ax works once that seller steps
off ask and starts supporting bid = boom. Usually want to buy a little before
s-8 is complete because then you can accumulate more shares. When S-8 is over
- the seller you have been spotting for weeks, days, months will leave the ask
and start supporting the bid. You will see a lot of market maker shifting as
well as MM's need to get ready for stock to reverse into opposite direction.
Example of dilution:
On some dilution is smart like ONEV. For example BMIC was diluting ONEV big
time, but he did it right and it still ran hard with him selling the whole way
up check out BMIC monthly share report on ONEV. April BMIC wasn't
there, same with PERT and UCAP.
Example: WNMI (finding an ax):
Apply process of elimination. You will see in Feb. CHIG and UCAP weren't there.
The run started late march. Remember this is month behind (delayed) => reason
we go back a month also another good idea to get more DD out of who is diluting
check s-8's, sb2's fillings, then look at chart before the stock broke out
notice who was soaking more shares than others this. Remember little MMs
don't worry about, they won't control stock and that's the reason why
we eliminate them (volume will blow them away) There was also CD's (convertible
debentures) out on WNMI before that u want to look for these also.
Miscellaneous Notes
NITE - doesn't dilute usually, unless someone is selling through him.
MM's know people are intimated by NITE so they use that to their advantage.
That's why NITE is the shaker he scares folks out. So don't get discouraged if
you see NITE on ask all the time. he could be leading a dip or something. he is
scaring sellers to his buddies TDCM, and SCHB on bids a lot of times.
Retailers you want bidding like TDCM
Big Shorters
JIMK - he seems like he is always short. Usually on those low vol. stocks
POND - is big shorter also
GNET is ARCA - anyone can use him, even other MMs because it's an ECN.
TRAC & DATA - biggest OTCBB ECNs, you love them on bids also
Market Millionaires Stock Market Investment Forum > Stock Market Chat > Market Discussion > Some MM explaining please
-----------------------------------------------------
Ax - one market maker that seems to control the supply/demand of a security or
stock
Convertible Debenture (CD) - Debenture which can be converted into stock at
the option of the holder and/or the issuer at a specified date in the future.
Because the buyer has the ability to convert the debenture into stock under
certain circumstances, the seller is able to borrow at a lower cost than if the
convertibility feature was not present.
ECN (Electronic Communication Network) - an electronic system that brings
buyers and sellers together for the electronic execution of trades. It
disseminates information to interested parties about the orders entered into the
network and allows these orders to be executed.
MM – market maker
S-8 - are paid out for services
SB-2 - are sold by company (Optional form for the registration of
securities to be sold to the public by small business issuers)
TOP 5 IMPORTANT MMs or wholesalers/retail (typically out of dilution):
NITE, GVRC SCHB, TDCM, GNET
Examples of wholesalers: HRZG, MASH, NITE, SHWD
Examples of ECNs: ARCA, BRUT, BTRD, INCA, ISLD, REDI
Top Dilutors (retailers): ACAP, AGIS, BAMM, BMIC, CHIG, CLYP, FANC, FRAN, JIMK, MAYF, PERT, SACM, UCAP, VERT, VFIN
Monthly share volume report is indicating the MMs and how many shares they bought/sold (it is a month delayed)
Important (on Level II)
1. to see who the players are
2. and who to watch for
Axes basically is main MM that is either supporting the bid or opposite
(hitting the ask).It is the party who seems to be controlling the action in the
stock. Also when a stock is dumping S-8 shares he will be consistent on the
ask. Once he jumps and starts supporting bid => S-8 close to being over => MM
movement is big.The ax isn't always trading the stock in one direction or
another. Sometime he is keeping it in a tight range. And sometime he is not
there at all. Another ax may step forward, but there are times where there is
no ax present doing anything of note.The point is the ax is the one to watch,
closer than all other parties or MM's. When you learn to trade with the ax
your odds greatly increase.
So how do we find the ax????????
The best way to find the ax is through familiarity of the stock. By taking the
time to watch the stock trade via Level II the ax will usually become quite
apparent. But since we want info now and not wait days to find out there's a
shortcut. It's no substitute for watching the action, but it can at least give
you a lead on a few parties to watch closer than others or MMs. Key = Monthly
Share Report!
Generally look at the top 3-6 spots on the report. I tend not to count
wholesalers at all as market makers. I also don't count ECNs as any number of
players can use an ECN (TRAC, DATA). I will also throw out retail ECNs like
GVRC for similar reasons as just mentioned, and also since most of the traffic
is retail. We are getting rid of unnecessary MMs. Plainly it just doesn't
happen where a little guy is going to control a stock. So that's why we
narrow selection.
One, the ax is not static. On any given day any party can be an ax. Heck, there
may be one ax in the morning and another in the afternoon and neither of them
could be listed in the top ten of the monthly share volume report. If a big
order comes onto the trading desk of a firm that doesn't do big volume in a
certain name the firm will need to work that order. And if no one else is doing
anything of consequence in the stock this new party will command the action.
An ax can easily use an ECN to hide much of their action. They can and will use
fake outs.
IMPORTANT:
Keeping a keen eye on Level II will reveal these things.
Monthly Share Reports and Level II patters are the key.
Watch the Level II and they use monthly share volume for confirmation.
Example of an ax who is selling:
When the market is rallying, the stock has a hard time moving higher, seemingly
hitting a wall every time. And every time the wall seems to have the same
initials and yet, when the strength subsides, the stock has no trouble falling.
And funny enough, the ax seems to be following the stock down. That's where
Level II comes into play. You have now found the missing link per se. You can
see around the corner and start to see patterns.
MM AX is on ask - it means he is driving price down - not good for us because
we are buying and not shorting the stock (can't short OTCBB).
Example of MM supporting PPS stock northward:
Let's say that a stock (shell) has been lying quietly at $.25 bid $.50 offered.
A limit order comes into one of the MMs to buy at $.50 for a thousand shares.
Prior to this trade that MM may be "flat" (neither long nor short any shares).
He fills the order and is now short 1,000 shares. He may raise his bid hoping
to find a seller to "flatten" out his position. But before he realizes it a
wave of buyers have come in and cleared out all the $.50 offers. Now the stock
is $.50 bid .75 offered. Here comes that "Big" firm he just sold the 1,000
shares to at .50 with another bid for 1000 at .75. He makes this print. Now he
is short 2,000 at an average of .625. The market keeps moving and now its .75
bid 1.00 offered. Now he has to make a decision. Just like investors, MM Hate
to take a loss. So 9 times out of 10 he will now sell 2000 at 1.00 making him
short 4000 but with an average .81. At this time he would love to see a seller
at .75 so he can cover his short and make a few but instead the market keeps
moving up. Now it is 1.00 to 1.25 and here comes the buyer again at 1.25. He
doesn't want to lose the call so now he needs to sell 4,000 at 1.25 to keep his
break even point above the bid. Now he is short 8,000. Market moves up to 1.25
bid 1.50 offer here comes the buyer now he feels he must sell 8000 here because
"stocks don't go up forever". Now he is short 16,000. And so on and so on. If
the stock keeps moving up, before he realizes it he could be short 50k or 100k
shares (depending how big his bank is). Finally the market closes for the day
and on paper he may look all right in that his "break even" price may be around
the closing price. But now he has to figure out how to entice sellers so he can
cover this short. It is important to note that if this happened to one MM it
has probably happened to most all of them.
IMPORTANT
Some ways MM's entice sellers:
1. Run the stock up with a "tight spread" in a fast market, then "open" up the
spread to slow down the buying interest. After it has "cooled off" for a little
while lower the offer below the last trade right after a small piece trades on
the offer then tighten the spread so that the sellers feel they can take a
"quick profit" by "hitting the bid" on the tight spread. Once the selling
starts the MM's will walk it down quickly by only making small prints on the
way down with the tight spread.
2. Another way is by running the stock up in the morning, averaging up their
short then use the above technique to walk it down in the afternoon. Hopefully,
after doing this for several days, it will demoralize the buyers. The volume
will dry up and the sellers will materialize thinking that the game is over.
Contrary to popular opinion, MM usually Do Not Cover in Fast moving markets
either Up or Down if they are short. They Short More. They usually try to cover
after the frenzy is out of the market. There are many other techniques they use
but the above are the most popular.
These techniques work about 9 times out of 10 particularly in a BB market.
However, that is because 9 out of 10 BB stocks are BS. Remember what I said
above. Most MM's don't have a clue as to the value of a Company until they get
trapped.
Example:
The ax seems to be following the stock down. Ax is killing stock on ask.
Question: If this behavior is recognized what would be the appropriate course
of action? Going long the declines or selling the rallies?
Answer: selling the rallies. Since we can't on OTCBB and Upside is limited
every time the stock tries to advance. Instead of trading against the ax and
hoping that the buyers will overwhelm him, it is much smarter to sell with the
ax and watch the stock fall as buyers pull away. Hence you would short it. The
only kind of buying which should be going on is the covering of short positions
as necessary. Work with the ax to your advantage.
Example: RWNT (trying to find dilutor):
Input RWNT into monthly share report. Remember focus on top 3 -6 spots. Don't
count wholesalers. VERT is the dilutor. Explanation: Look at April. Then look
at May. Nothing in April. Then he dumped 57mil shares in May. You can even go
back to March and he wasn't even a listed MM. So he came on in April and then
he started his selling.
Keep in mind that RWNT is extreme and you're not always going to see that.
S-8:
S-8's - you need to read filings and see exactly what they are for some s-8's
actually aren't bad some are employee stock options etc. MM can remain on the
ask for months, however long it takes to fulfill S-8 shares. They don't care
what price they get.
S-8's are great tools to watch and learn how an ax works once that seller steps
off ask and starts supporting bid = boom. Usually want to buy a little before
s-8 is complete because then you can accumulate more shares. When S-8 is over
- the seller you have been spotting for weeks, days, months will leave the ask
and start supporting the bid. You will see a lot of market maker shifting as
well as MM's need to get ready for stock to reverse into opposite direction.
Example of dilution:
On some dilution is smart like ONEV. For example BMIC was diluting ONEV big
time, but he did it right and it still ran hard with him selling the whole way
up check out BMIC monthly share report on ONEV. April BMIC wasn't
there, same with PERT and UCAP.
Example: WNMI (finding an ax):
Apply process of elimination. You will see in Feb. CHIG and UCAP weren't there.
The run started late march. Remember this is month behind (delayed) => reason
we go back a month also another good idea to get more DD out of who is diluting
check s-8's, sb2's fillings, then look at chart before the stock broke out
notice who was soaking more shares than others this. Remember little MMs
don't worry about, they won't control stock and that's the reason why
we eliminate them (volume will blow them away) There was also CD's (convertible
debentures) out on WNMI before that u want to look for these also.
Miscellaneous Notes
NITE - doesn't dilute usually, unless someone is selling through him.
MM's know people are intimated by NITE so they use that to their advantage.
That's why NITE is the shaker he scares folks out. So don't get discouraged if
you see NITE on ask all the time. he could be leading a dip or something. he is
scaring sellers to his buddies TDCM, and SCHB on bids a lot of times.
Retailers you want bidding like TDCM
Big Shorters
JIMK - he seems like he is always short. Usually on those low vol. stocks
POND - is big shorter also
GNET is ARCA - anyone can use him, even other MMs because it's an ECN.
TRAC & DATA - biggest OTCBB ECNs, you love them on bids also
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