MM's by name will help you remember what they did the last time and help you make better decisions this
time around. Also find out how big they are and if they are a public company, check out how they are doing.
NASDAQ's OTC BB website lists market makers by how many shares they have traded for the last few
months for a specific stock. This can help you get a fell for market liquidity. A Market Maker that only trades
a few shares a month is likely to only provide the 5000 share minimum when they are on the inside bid or
ask. A larger and more active one is likely to provide more. Also try and find the Market Maker in your stock
that trades a similar number of shares a month as you do. Watch this firm closely and try to mimic their
actions and learn from what they do.
Remember that NASDAQ Market Makers like to keep a certain amount of shares of inventory as they
legally manipulate stock prices. Try doing this for a week or so with OTC BB issues: Keep a running tally of
which market makers where on the bid and ask when orders were filled at the bid or ask. Start with a very
lightly traded issue to make it simple. Assume that all trade going through at the ask where bought from
the market makers on the ask and split up evenly. Also assume trades going through on the bid were sold
to the MM's equally on the bid. Discard trades going through in the middle. After a week or so you will
begin to be able to determine which MM's are sitting on more shares than normal or are low and need to
Do not be afraid to use your extra cash to get better prices when you sell or use share's when you buy.
Pumping up the price with cold hard cash is what its all about and there's nothing illegal or unethical about
it. Even with a tiny bit of money you can work the level two screen just right in these cheap stocks. Do not,
however, think that all the Market Makers are clueless as two what your doing. There are plenty of clueless
day traders out there and if one or two of the MM's have a similar position and intension as you, they may
use you to there advantage so to speak. Look for opportunities to sneak in on the inside bid real quick and
sell on the ask. It doesn't happen often but if another market maker joins, up your price one more time and
day traders will start buying all the asks. Remember to back out as quickly as possible and chances are
the MM that was advertising for you will stay, because they wouldn't be there if they didn't need to be.
Market Makers group up at a lower bid for a reason. It could mean that a large number of them want or
need shares at that price. Take a look at where each one is willing to sell. If they all have high asks and do
not budge, chances are they are leaning bullish and will jump in if it goes down a little. Watch a couple or
an increasing number of these MM's to lower their asks to the inside. This will usually cause the rest of
them to join their lower bid. This combined with large trades going through at the bid and small 5000
share trades going through on the ask or lower is a sure sign to wait for that lower price.
Market Makers see risk the same way we do and that is why they typically only provide 5000 shares at a
time. The lower the price the less money they have to put on the line. When a stock reaches 50 cents or
more you will see them lower to 2500 or 500 share at a time. Only expect to get 5000 shares at first when
sending an order because this is all they are required to provide. They will usually take a lot more but this
gives them more time to sort through the orders. When you see a trade go through for 5000 shares you
know that a day trader just moved and can expect more to come as they will sit tight on their order to prevent
higher trading costs. When you see more than one 5000 share blocks going through at a time you can bet
that there are more individual traders playing the game. Look for a bunch of 5000 trades followed by larger
ones all on the same side of the board to forecast a rally or sell off. Traders then adjust the rest of their
order up or down to finish it after seeing the stock move up on them right before their eyes. A good rule of
thumb when getting out of a position at a preset stop loss price is to figure 5000 shares per Market Maker.
So if you want to dump 15,000 shares, fire your order when there are only three MM's left at your price.
Super low priced securities may hold an exception. Figure on no more than $250 to $500 dollars per MM
no matter what.
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