flasecretary - A must read for all!
Yes & no; They want shares lower to sell into a good run. But don't have as many low as they want. So they decided to stop the run, until they built their inventory up lower. When they feel they have enough, they will sell for a profit.
My take on all MM traded stocks is the MMs make money on fees for the volume of share traded and they make money on profits from the buying and selling of their inventor, to "make a market".
Now how can you make the most money, if you have control of what happens to the stocks PPs. You would want large volumes to create large fees and you would want to accumulate inventory shares at low prices and sell them at high prices.
Simple.
When is the best time to accomplish the goals above. Accumulate shares lower as the PPs walks down on low volumes and sell those shares into a high volume run higher.
These are the facts to my posts. The opinion parts are the tools they use to accomplish these goals. This is where I get into illegal action.
Market makers are not suppose to control trading. They are suppose to help the trading atmosphere, by using their large inventory to keep trades trading at bid/ask.
Another words, they are to fill trades, when retail traders orders come in without a matching retail trade order.
Now you say, if there are 10 MMs covering one stock, how can one MM control what happens. (the illegal part) They signal to each other with trade sizes posted in the open market trading system. (the level II you watch)
When a retail trader (you) places an buy/sell order, it goes to the market maker. They then are to take that order record it in their books and place it into the open market trading system. My claim is they hold orders for a short period of time to see buying pressure and selling pressure.
Once they determine where their orders want to go the signal with a single order to the open market. You can notice these, because they normally don't fall inline with other orders your seeing.
Once several MMs report what is on their desks, the retail traders want up or down. Now the MMs will signal with what they want. Once a over all consensus is out in the open market, one MM will start a move, in the direction of that consensus.
This is very complex, as you can see. If several MMs see large block order high and want to get the fees for themselves they may go against the consensus and get them. On the other hand in most cases the move will follow the majority.
I've been posting some of the signals I've noticed and by no means are these fact!
When you see ODD number trades (1578, 4567, or 15568) at the ask, it says, one MM has more buy orders than sell. If they are at the bid, they have more sell than buy.
If you see small rounded orders, it means one MM has large block orders, the direction the block order is, is determined by if they are at the bid/ask (100, 200, 700, 900). The size of the small rounded order shows the size of the block order, (100) may be a small block order and (900) may be a large block order.
When all this info is out, you will see several from different MMs. Then, you will see Matching trades in seconds of each other, with very close spreads. Telling each other what the MM wants to do. If the spread allows the matching orders at the ask show they want an up move, if they are at the bid, a down move.
I would have to go on for ever, to list all the tools and will end this here. I hope it gives a basic understanding on the OTC:BB market you are playing in. And all should understand, non of what I am posting is true fact. Because it is illegal. The fact is market makers make money on fees & margins!
