Member Info for investor33

Pedrob999 - you seem not to even believe that MMs hold an inventory of stock. So how exactly do they make a market ? On AIM stocks no doubt they keep a smaller inventory compared to FTSE 250 stocks, but they still have to accumulate at some stage - and clearly it doesn't just happen in a day or two. The spread acts as a brake and accelerator - right now it is wide in order to deter buyers whilst stock is being accumulated. It also maximises profits if there are any sellers about.

Ok thanks Ojay.

Wide spread means that the MMs are discouraging activity in the stock - possibly they don't hold much inventory right now, and are accumulating. MMS widen the spread in order to minimise their risk and to take more profit in case some decide to sell at this price level. I noticed the other day that the book Naked Trader - which has been so popular that it has been reprinted several times - has a separate section on how MM manipulation works. It explains ' tree shakes ' etc. Amazing then that a few on here seemed to be quite unaware of this, with one person on here even indignantly claiming that MMs run a scrupulously fair market as per Adam Smith's perfect market economy model based on the ' invisible hand... '

Manro ; relatively thinly trades stocks on AIM are the easiest to manipulate. Large and mid cap stocks are harder, as there is a more constant flow of buy and sell orders. Like I mentioned, with Petro Matad the MMs can move the stock up or down 10% without any buy or sell activity whatsoever simply by widening the spread - so much for Adam Smith's ' invisible hand. In a perfect market there would be a large number of buy and sell orders at any given moment equally balanced. ' Anybody who has studied various kinds of charts will have noticed spikes at the top and bottom of reversals, whereby the price is suddenly moved rapidly down only for the bar to finish on a high when a reversal is about to happen at the bottom, or rapidly up and then down again only to finish on a low when a reversal is about to happen at the top. This is caused by MMs hitting buy or sell stops and then having hoovering these up, before moving the stock or index rapidly in the opposite direction. I have day traded many times using this very reliable signal on index futures.

Manro - the ' mystery ' is MMM, 'Market Maker Manipulation.' To be honest I'm really surprised at the number of people on here who don't understand how MMs work. They are not some kind of beneficent neutrals keeping an orderly market based on fair play - they are busy trading their accounts at the same time that they are making a market. Tom Williams and his VSA software was based on the activity of MMs and the manipulations that they carry out, which is reflected in bar chart/volume chart patterns.The 25th to 31st October Investor's Chronicle has a good article on the subject entitled ; ' Shake your market maker. MMS are the subject of much mystique.Are they human ? Yes. Do they make money at your expense ? Probably. Do they monitor Twitter and bulletin boards ? Almost certainly. Wouldn't you ? '

Pedrob999 ; ' good ' and ' bad news ' are ideal situations for the MMs. Take some recent ' bad news ' about Gazelle, the MMs took the oportunity to lower the price down to about 2.5p. At that point they would have shaken out lots of short term traders and accumulated lots of stock for their inventories at ' wholesale ' price levels. MMS know that short term traders can be easily shaken out of positions, whereas long term investors in a decent stock will try to accumulate stock at lower prices if they know what they are doing. Joe public will buy into a quick upsurge for fear of missing out, and can then be easily spooked out a position if prices then drop suddenly - we have seen this over just the last few days. Those MMS that accumulated at 2.5p and then sold into the deamand at around 5p did very well, whereas Joe Public that got excited by the ' good news ' about Heron 1 and jumped aboard will have been panicked by the sudden pullback down to around 4p. When you talk about ' normal supply and demand ' what if MMS held 100K worth of stock at levels of around 2.5 to 3.5p but when the news about Heron 1 broke there was demand for 250k worth of stock ? Their inventory is now 150k short in order to meet the demand. The answer is to short the stock and thereby fill the buy orders at the asking price. Once demand tails off the spread can be widened at the top so as to deter buyers and to start to shake out short term traders who may suddenly see their profit start to vanish. Then the bid and ask can be gradually lowered so as to shake out as many short term traders as possible and to eventually start building up their inventory through accumulation again. Even if there are no buyers and sellers at all the price of the stoick can be altered by 10% or so simply by MMs lengthening the spread ! MMs do work together as well....Their work is helped by some of the idiotic scare mongering that you tend to read on these types of forums from the likes of Dusthater - MMs can read these forums as well of course.

Ojay - there is a good article about MMs in the latest Investor's Chronicle. This article below is also quite good, as it's written by a previous MM. It applies to US markets, but the principles are the same here ; https://www.reddit.com/r/weedstocks/comments/1xydch/market_maker_speaks_out_ways_of_a_market_maker/

Plus MMs can short the stock, thereby selling you stock which they don't actually own. They can then buy it at a later date when it suits them - ideal if they have sold stock near the top of a spike and then can buy it back after a strong pullback. So MMS can make money in 3 ways it seems to me ; 1) through the spread - the greater spread the bigger the profit 2) through accumulating the stock at 'wholesale prices' at the bottom and selling it at ' retail ' through a distribution phase at higher levels. This can be done through widening the spread to deter buyers and to bring in sellers. 3) through shorting the stock at higher levels and then covering their short positions through buying at lower levels.

MMS have to hold some stock in order to make a market - if there is a sudden surge upwards on news then they have to meet the sudden flood of stock being purchased at the asking price. Supply and demand are not in total balance at all times, so if you purchase a stock there may not be a seller lined up simultaneously. If there are few sellers, then they need to sell from their own inventory. The trick is for them to accumulate whilst prices are low, which can be atificially induced by dropping the bid in order to shake out weakholders. Effectively this way they can accumulate a stock at wholesale prices.

MMs are busy accumulating right now - there's a nice wide spread caused by MMs dropping the bid so as to panic weakholders and to cause a tree shake. Don't listen to the doomsayers who are just trying to spook weakholders out of their positions so that there is more stock to hoover up during this process of accumulation. The more negativity about a stock that you have on these types of forums, the more it plays into the profit-making activities of the MMs, who frankly don't care if you lose out....

Re the latest pullback - don't forget that MMs might not hold enough quantities of a stock to cover a sudden rapid move upward - yet they have to make a market. As demand slows near the top they may widen the spread to deter further buyers, and then start to drop the bid and ask in order to trigger selling so that they can then purchase stock to cover their short position on the stock. a ' tree shake ' is all about spooking private investors into selling their shares. Hence spikes are always followed by pullbacks. On the way up the spread narrows, due to demand and competition between MMs, and at the top and during the pullback it widens in order to put off buyers, and to shake out sellers. Don't forget too that MMs read these kinds of forums....