posted
....or anyone else who has an understanding of how MM's work. As a newbie to this trading game, I have come to understand that I am a small fish swimming against the tide which undoubtedly is under the control of the MM's.
My question is very specific. What does it mean when an MM such as NITE leads both the bid and the ask according to level II? More specifically, I am referring to MLHP, which I am looking to purchase, but am suspicious about as I have come to be really guarded when I see the symbol NITE leading both the bid and ask. Is this normal? Can somebody please explain what this means and what the implications may be. I've directed this at Purl Gurl as she seems to be very clued up on how MM's think and work. All opinions however would be welcomed.
Understanding Market Makers requires research, reading, learning and a lot of direct observation.
Most critical point to keep foremost in your mind, is all Market Makers are crooks out to steal as much money as possible. May seem an illogical and unfair assumption. However, assuming all Market Makers are malicious financial criminals, is your "safest" assumption.
Market Makers know nothing about stock value, stock fundamentals, history and know even less about investing. They operate solely on technical trends and an ability to manipulate prices to their benefit, only.
Read a bunch of articles through that link then return and tell us what you learned. We will, in turn, learn from you.
Buying from or selling to NITE is a sure bet you are being ripped off. NITE is well known for being the most crooked of all Market Makers, and they do not care one bit.
I pretty much know that they are a bunch of manipulators (to put it mildly). However, that is a given if you've done even the smallest amount of research into trading. Most people haven't, which is why they fall prey to the big boys. I myself have been burnt more than a few times.
I also know that understanding the trends that they are following (or even creating), is what will eventually save me from being just another small "investor/trader" whom the MM's can prey upon. My question is more about how to learn to identify the specific tactics which they are using, in order to prevent me from becoming a "victim". You seem to have a knack for spotting these things, and I was wondering if you learned these skills, or if you are just good at maths. I am currently reading a very good book "Tools & Tactics for the Master Trader" which does a pretty good job of painting the true picture of how MM's think and operate. Off to read that link now. Thanks again.
posted
Hmmm...might have to buy that "Idiots Guide..." book, just for the Level II section. If anybody can recommend a book with a reeealy good Level II section, please let me know. I think that's my weakness right now.
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Ah, if you want to develop a knack for spotting Market Maker trends, you must think like a swindler, like a criminal.
Predicting Market Maker behavior is very difficult. There is not enough data at level 2 to confirm your thoughts.
Best defense against Market Makers is your research. Look for value stocks, this is, companies with good financials, good strength and a good management team.
Your odds are better for surviving attacks by Market Makers, but you may still fall victim to their unethical practices.
Know your stock well, watch it for months on end. Put yourself in a position of knowing exactly what your stock will do, under any given market conditions.
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What will always leave you guessing is how much the MM's do know--- can they see all of the stop loss limit orders? a simple puter program can tell them how far down to run it to clear out all the weak hands then fill the asks---- PG is right that they make their own rules as they go------ -but- --we need them---- - I think that a lot of suspicious activity COULD be explained away legally--and once again it is a book--- but consider that DAY-traders may be doing some of the things that the MM's appear to be doing--and legally--it doesn't matter--it happens---however you splain it--- nite is da boss--do your DD and you will be OK--it may take longer than you like --but---the market is ALWAYS RIGHT in the end
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Thanks peeps. Yeah, I always do my homework, but I guess as you say, these guys have access to so much more info than we do, and it's all about WHO they know and WHAT these individuals know. I mean within these organisations. Poor little suckers like me have no choice but to put my neck on the line and hope that fundamentals will see me through. Then again...look at Worldcom. It's a jungle out there, no mistake.
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FNG, F'n New Guy, originates from the war over in Vietnam. FNG, the first to die.
Shorting on the down tick. This is taking advantage of falling prices to drive them down even more, most often employing induced panic selling, resulting in prices well below actual value.
Down tick shorting is extremely destructive and is not in compliance with bonafided Market Maker activities. This is most often violated rule.
TXCC, if you look at a price chart for early December through early January, you will see what happens when Market Makers short on the down tick. This huge dip in prices is Market Maker created by causing panic selling through shorting on the down tick, a securities law violation.
Market Makers are to follow rules which include "bid test" and no down tick shorting.
A bid test is designed to guide prices in a rational manner by testing lower bids or testing higher bids, to discover where the market truly is, a test of fairness.
HOM, few days back, two Market Makers dropped the bid twenty cents, instantly, then bought low sell orders they sat on all day. This is illegal, it violates the bid test rule.
HOM has not recovered and will not for a very long time.
Shorting on the down tick - deliberately driving prices lower by selling small lots at increasingly lower prices to drive prices down to unreasonable lows, after shorting, then buying to replace shorted shares.
Bid Test - requirement of gradual and very incremental tests of both bid and ask prices.
Those are the most often violated rules, in there with "front running" violations.
HOM, is an example of front running; using "inside information" to profit.
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PG. Question. Perhaps I am being in the extreme, but begs the question....if these violations are so obvious, why don't the companies involved raise complaints, gather evidence etc, and present all this stuff to the SEC. I am aware of your feelings about the SEC BTW as I have been following this board for a few weeks now. At the end of the day, it is the shareholders (and employees) who are getting hurt when the "value" of a company is decimated overnight because of a greedy MM. If I was the CEO of a company who really cared about the company I was chairing, I would do what was necessary to protect the company. Crooked CEO's aside. Again, I know this sounds naive but I still would like to know the reason for this inaction.
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Very complex story. Biggest factor is those populating management at the SEC, are from Wall Street, they are crooks watching over the crooks.
Average time for the SEC to investigate a single case, two years plus another year to take civil action.
Many companies will not file complaints because the SEC instantly punishes them with endless subpoenas, which shows up in news, making a company look bad.
Filing a complaint with the SEC ends up with the victim company destroyed.
Last year, the SEC brags about two, only two prosecutions for illegal shorting.
Ken Schilling, nailed for seventeen counts of securities fraud. His fine? $20,000 and made a profit probably ten times the amount of the fine.
His fine is, de facto, a bribe,
"Ok, I will pay you twenty grand to go away."
The SEC cannot prosecute. If the SEC did take aggressive actions, so much fraud and crime would be uncovered, the SEC itself would be investigated for incompetence, if not criminal violations.
The SEC and Wall Street, organized crime well fitting the intent of RICO.
The SEC will not prosecute its own but will fry the small fish just to convince (bamboozle) the public into believing they are doing their job, which they are not.
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