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Microcap & Penny Stocks : Dollar and Under Sleeper Stocks
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To: Ga Bard who wrote (1742)11/8/1997 3:19:00 PM
From: Esteban  Read Replies (2) of 8835
 
GaBard,

I don't know if I agree with you re: "Basically the MMs are sending out a message either buy at the offered ask or pay the piper. I can roduce numerous stocks that when solid buying came in the price fell and not one sell. But because of the midpoint this stock price fell an actually the price plummeted on very few sells. Since most investors do not watch trading logs they really have no idea what they are doing to their investment buying at the midpoint. The MMs are treating midpoint buying as a sell even if it is a buy."

If orders are flowing between the spread on the buy side, this intrinsically indicates a slight weakness in the stock price even though the orders are to buy. Buyers believing they can negotiate a better price indicates they are willing to sacrifice a sure execution. The reverse is true for selling between the spread, sellers are willing to sacrifice time for price. Knowing that midpoint trading is inbalanced one way or the other affords an astute trader the opportunity to profit from the MM practice of initiating small moves in price. In the case you described a prudent course of action would be to wait until there are orders flowing at the ask, then jump on at the ask or at that time try for price improvement. Eventually, the demand for the stock will dictate the price. Discovering these MM games and spreading the word about them will eventually stop these practices as we traders adjust. Thanks for your insight into this practice.

I think we little guys should continue to both buy and sell between the spread whenever it is more than the established minimum and we are not in a panic to initiate or liquidate a position. The competition generated this way will force the MMs to keep the spreads low, or be left out of the game.

How do you know whether a trade at the midpoint is a buy or sell order? My time and sales from PC Quote doesn't reveal this information.
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