Alto Ingredients Inc (ALTO)

[Rule_62]

I think they're more common for people who can't watch the market during the day. I use alarms on my platform, but never use stop losses. Saw the havoc they can cause on volatile stocks, where MM's could cause a $0.50 drop on a $5 stock.

What a lot of people who set stop losses don't realize is the MM's can see them, right along with all the other order data that doesn't show on L2. When they see a large pool of stop losses near the current price, they'll manipulate the share price to trigger them, and set up large buy orders below. Stop losses trigger as market orders, so triggering a large pool of stop losses can momentarily overpower any nearby buy orders and cause a flash crash. Instant profit, as usually the price recovers very quickly. Of course in other circumstances, they can also short the stock first and then trigger the stop losses, using the underlying buy orders to cover their shorts.