Agreed. Time for a quick OTC trading refresher for UNQL. Many here know how this works, but it is intended to help those who may not.
What is MM manipulation? What is bid wacking? What is slapping the ask?
When you identify a thinly trading OTC stock with consistently large bid/ask spreads, you are watching market makers manipulate the stock. It is not illegal. They are making a market for a stock with little interest/organic trading. Market makers are large trading houses with enormous capital. They can easily buy up a ton of shares to hold in inventory. They work with big money traders who deposit big money in their accounts and say something like get me a million shares of xyz company as cheap as possible over the next 3 months. There's your foundation.
When you see the same MMs on Level 2 stacking small to medium size bids repeatedly, you see the manipulation. Those bids never seem to hit. The current ask is 20 points higher. A frustrated trader thinks he made a bad decision and wants to sell. So he sets his ask below the highest ask. That will get my shares sold, right? Wrong. No one wants to buy at that price. And what happens next? Some MM puts in a lower ask order to undercut yours. No sales, or maybe some small trade at 100 shares. Dammit! This keeps going down. Screw this, I'll just enter a sell order at the highest bid price. You, my friend, just whacked the bid. You sold at the posted highest (ahem lowest) price someone was willing to pay. But it's not over. As the MM has another fish on the hook, you see your entire order didn't fill. You still have half the shares you tried to sell. And what do you see next? The bids just adjusted and the highest bid is now 10 points even lower. Arrgggg, you say to yourself. You enter an all or nothing sell order at the highest bid price on the board. Congratulations, you whacked the bid again, lowered the share price, gave the MM and or its whale customer a great bargain, and the process resets. Bid whacking 101.
What about slapping the ask? That is when demand is actually high. Shares are flying and volume is going crazy. You can't get shares so you just try and buy at the ask price. But volume is so high, you keep getting shut out and have to keep raising your bid price to get shares. When you finally succeed with a buy under these circumstances, you slapped the ask. You bought someone's shares at their ask price. Pretty easy to understand. That's why when volume dries up, someone begs for the group to slap the ask. Take one for the team. Let's get some upward momentum going. And slapping the ask can work for awhile to drive that price up. But look who is waiting. The MM with marching orders to get shares for the customer as cheap as possible. As volume dies, the bids get stacked again to drip drip drop the price back down. This process usually comes with a huge ask wall in the form of a large share ask. If that wall holds, no one is able to sell their shares higher than that wall. Maybe there is a trader looking to book profits. Easy, just set asks below that huge ask wall. And the price starts dropping. Slapping the ask stops, and then bid whacking starts again. The MM only wants cheap shares. The MM can wait. And wait. And wait. The retail trader gets scared and sells into the dropping bids out of fear. Bid whacking all over again.
Then there are stop losses. "Smart" traders say I know how to protect myself. I will set a 10% stop loss. Well, in this OTC manipulation pattern, you my friend are an idiot and part of the problem. Your brokerage will post that stupid stop loss ask when the price is dropping and our not so friendly MMs with customers on the hunt for cheap shares are licking their lips as they drop the price down to devour your shares at a loss to you. It's pathetic really. MMs are like wolves waiting to eat their fill of sheep every single day on the OTC.
Hope this helps.
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