Gary: Interesting post. You are a keen observer of MM tactics. My perspective:
I think you have weighted a great deal of the stock trading behavior on the effects of the MMs. If I'm understanding you correctly, traders are essentially at the mercy of the MMs unless they accumulate enough of the float in advance of any significant trading volume and then stay long through periods of high volume activity. Weathering such a storm may be courageous for those who are indefinitely long and believe in the future of the company, but what are we really dealing with here in OTC stocks anyway ?
To me, most of the volume in OTC trading is composed of 'trader' volume rather than 'investor' volume.
These are the players:
1) the MMs
2) the newsletters, promoters (paid in $ or stock)
3) the traders
4) the investors
5) last but not least, the corporate insiders and major shareholders.
I make it a point to assume that in every case, each group of players is first and foremost self-serving. However, the success or failure of one group of players is not exclusive. You can pair them up as you will, but the fact is on any given day each group of players will have some winners and some losers. That we cannot be all winners or all losers is the only predictable conclusion to me.
I would like to pose these questions to you:
- If there were an electronic exchange for OTC:BB stocks as there is with Nasdaq stocks, do you think that any trader/investor would be any better off ?
- With no MMs to manipulate the stocks in the manner you described, do you feel you would do better in your trading ?
IMO, it is the very lack of control that has allowed individuals to succeed or fail so dramatically in OTC:BB trading. I sincerely doubt that MMs completely run the show. A flood of enthusiasm for a thinly traded BB will overwhelm the shrewdist of MMs and it is primarily the desire to take brisk profits by the trading public that will put such a stock into a tailspin. Certainly MMs will play their role in this. It's all a game. And in the OTC world, one must understand that the rules are not steadfast.
To succeed, IMO, you must:
1) Be a quick judge of mass appeal for a given stock (ie know something of human psychology)
and
2) Know thyself. (are you disciplined? do you know when to hold'em and when to fold 'em ?)
In the past 2 years I've done a lot of hold'em and fold'em, and I often find myself thinking that just when my confidence is building and I start to feel that have it all figured out, I don't.
It seems that those two points above, about knowing human psychology and knowing oneself is an ongoing process. A lifetime process. And it applies not just to trading OTC:BB, but just about everything else in life.
Best wishes. |
