Order Spoofing Pushes Stock Down 22% in 5-minutes

What's up everyone? All right, in
today's episode, I'm going to break down
the leading gainers in the market right
now. I'm going to walk you through my
trades from the morning, and we're going
to talk about order spoofing. We're
seeing it again. Order spoofing is
illegal. It's a manipulative practice of
putting out big orders, not with the
intention of those orders executing, but
with the intention of influencing other
participants in the market. And so you
could see order spoofing either on the
offer where you see a big sell order up
on the ask and they don't actually
intend for their order to get executed.
You know that because when it starts to
fill, they'll cancel it and they'll move
their order higher. So that order is
just trying to create the impression of
overhead supply, overhead weakness, sell
orders. So buyers won't buy into it,
right? So what's the motivation of
having a big sell order like that? The
motivation would be that the person is
already short the stock and they want
the price to climb. On the other hand,
an order spoof on the bid means someone
showing a really big order on the bid
and they want the price to go up. They
want people to take the impression that
that means there's some significant
buyers out there and some real strength.
So, we see that when someone already
owns a long position and they want to
send the price higher. So, which side
was the spoofer on today? They were on
the sell side. Let's go ahead and jump
onto the screen. I'm going to show you a
recording from this morning on VBIO.
This is the stock that was up um about
44% on the day. So, it was our third
leading gainer at that time. We had
CNTB, which was up a little bit more,
LGHL, which was up a little bit more in
NCI. So, VBIO's right here, fourth
leading gainer. It's got breaking news
today. 12 million shares of volume, 1.6
6 million share float and about 277
times higher volume today than its
50-day average. And this is the chart.
It's rallying up right here. And in this
area, I decided to buy a dip, which is a
micro pullback on the one minute chart.
You can see on the 10-second chart, this
little consolidation, and I was looking
for the break through 420. So, I've
already taken my position. I'll just go
back to the beginning of this video
here. These are the types of live
archives that our members get to um
watch. We've got hundreds of them. So
you could see my eye tracker. So I've
got a little camera that tracks my eye
movement around the screen so you can
see what I'm looking at. So I bought
10,000 shares there and I filled an
average of 408. It goes up to 415 416
415 and it doesn't quite break
immediately over 420. So I was like
that's not great. In fact, it drops back
down here to 399. So then it pops back
up to 404. So I'm like down 10 cents and
I'm back to up 10 cents. Was kind of
like sideways here and I'm watching it.
So, looking at the bid, looking at the
ask, checking the And right there, right
there. Do you see that order?
Right now, we have a 200, sorry, uh,
it's 250 shares is what it looks like,
but you had 20. So, it's a 25,000 share
order at 406. So, right now, the order
is at 406. Wait, it just moved. Did you
see that? Let's back this up. What we're
going to do is we're going to back this
up and we're going to slow down the
video here. So, I'm going to slow down
the speed down to um half speed. And
what you're going to see is that the
order appears initially at 407.
Then it drops to 406. It drops to 405.
It drops to 404. It drops to 403.
And you can see the order doesn't
disappear. This is an algorithm that's
doing this. This is a more sophisticated
type of order spoofer. This is not
something that a retail trader like you
and I would really be able to pull off
because of the way the order is moving
in that um in that fluid motion. So,
we'll even slow this down a little bit
more. We'll go to uh quarter speed just
because of how quickly that order moves.
So, it's the same order of 25,000
shares. It's going to appear at 407 in
just a moment and then it's going to
move to 406, 405, 404. Now, what what
you know, what I know is that if I put
out a big order like that, I would need
to cancel and replace in order for it to
move down. Now, they're using a pegged
order type. Pegged orders mean they're
pegged to one price or the other. And
rather than pegging to an actual penny
price like 105 or 405 or whatever, they
peg just simply to the offer. So,
whatever the offer is is going to be the
order. However, pegs only go down, not
up. So, this is when they're on the
offer. So, this seller, this spoofer is
using an algorithm that allows them to
peg to the offer as the price comes
down, but they also peg as the price
moves up. Now, this is kind of unusual
because, and this actually is what um is
sort of the smoking gun that this is a
manipulative practice because let's just
think about this for a second. If the
order right now is 406x47
and it's 25,000 shares right here,
they're on the ask here. So if all of a
sudden some buy orders came in and it
went 24 23 22, well the order would
should stay there and all of those
shares get bought up until it goes to
zero and then the price moves up to 408.
But instead, what happens is after a few
orders go through, the order gets
cancelled and moved up to to, you know,
23,000 at 408. A couple more orders go
through, it gets canceled again, it goes
up to 410. So, these spoofers like to
keep the big sell order just slightly
above or at the current market price.
But when buyers start to come in, what
we've been tending to see is that the
order gets bumped out. Now, if the order
executed every time you had um enough
buyers, then this is just someone
genuinely trying to sell shares. And
then we would attribute it maybe to the
company using an underwriting bank, a
investment banker who was is familiar
with these more sophisticated order
types and that it's the company that's
selling the shares directly on the open
market, which is which is certainly
possible in some instances, but when the
order moves up as well, that's a little
bit more suspect. So, in this case, in
any in any event, we're now at 40 uh5
and now we're going to drop down again
404. You see it's 24,900, 24,800,
25,000. So, the order is changing around
a little bit.
We're at 403 right now. And this is on
ARCA. We've got 25,000 shares, 25,100.
So, now we pause for a moment. Now it's
402.
And in this case, I did hold it longer
than I should have. I wanted to see if
it would hold at four because I saw
there was a buyer there at 15,000
shares. And I thought, uh, well, maybe
this will hold at four. And then it
bounces back up. Now it's 32,000 shares.
There's a lot of sell orders going
through here. No one's really wanting to
buy because you've got this big seller
on the ask. And this is the the
challenge with sentiment in the market
that when you start seeing these types
of sell orders, you get nervous to buy
and then as you get nervous to buy, you
don't execute your buy orders. And then
when you don't execute your buy orders,
of course, what happens is the price
goes the price isn't able to break out.
So we stop seeing breakouts. So it ends
up that we have these stocks where
everyone's sitting on the sidelines. it
might have in another market ended up
making a big move but everyone no one's
afraid to take the first step and even
if someone does take a step people are
still too um nervous and then what will
end up happening and that's classic for
a cold market what will end up happen so
I sold started unwinding it there and
I'm all out of my position sold and I
sold at the bid I just bailed out so
what ends up happening during these cold
markets is it's cold and cold and cold
until finally you have a stock that
surprises everyone and it just takes
takes off. Um, and you know, in spite of
there not being maybe as many people
buying the breakout, the thing goes
higher. So, see, now the seller's back
at 99. So, now they're holding it uh so
it can't pop above $4. So, holding it
right underneath four.
And so, the problem here is that uh
things stay cold because you believe
it's going to be cold, it stays cold.
You could actually extend this to the
float of a stock if um you know if you
have a a lowflat stock, let's say it's a
1 million share float stock, but the
data was incorrectly added to the
exchange or to the scanners for everyone
and it says 100 million shares, then
people are going to believe it's a 100
million share float and they'll trade it
as such. They won't be interested in it
because of the perception. In fact, the
perception can be in that example
different from the reality. The reality
is this is a 1 million share flop. This
is the type of stock that could make a
big move and that actually doesn't
matter because people won't believe it
can make a big move. And if they don't
believe it will make a big move, they
won't buy the shares. Shorts will be
confident and it won't work unless
there's someone behind the scenes that
is a big enough player that they see
through it. they recognize the
opportunity and then they go ahead and
capitalize on that um sort of uh
disconnect in sentiment, but
capitalizing on a disconnect in
sentiment, you could argue that that's
the same thing that short sellers were
doing when they were trying to short
GameStop. There was a disconnect in
sentiment there to the upside. The
sentiment was really, really strong, uh
but the fundamentals didn't support it
and so that stock probably shouldn't
have stayed up at those levels. So
people start shorting it and next thing
you know it goes from 50 to 100 150 to
200 to 300 to 400 500 right keeps going
higher. So you do have to be sort of
careful with that. Now in this case we
do see actual sell orders getting filled
on ARCA. And so we've got this sell
order that's sort of hanging out right
around $4 a share. And then what ends up
happening is we break down yet again.
And we'll see I can bring this back up
to regular speed now. So we've been in
sort of this right underneath $4 window.
And I think at this point you also uh no
doubt have traders who are trading to
the short side on this because they're
clearly seeing the weakness and long
bias traders are nervous to jump in. It
pops back up here for a minute and part
of me is like should I jump back in? But
I'm going to get right back in where I
got stopped out. I don't know. That
seems kind of silly. I think maybe I'll
just hold off. So I hold off and thank
goodness I did because then look at
this. Let's see. So all of a sudden
let's just back that up 10 seconds.
So then all of a sudden it breaks
back below four and the bottom falls
out. It just flushes all the way down to
70, all the way to 69 there.
And now the seller is back at the
perfect time. Right? And now see how
their sell order is moving again. So
we'll back this up. We'll slow this down
again. Oops. Not do that. We're going to
go speed. We're going to go half speed.
So, let's play this.
So, he's at he was at 72, then 70, then
7 71, then 70.
Now, he's at 66,
65, 64. Now, the order's gone.
Now he's back at 61. Now he's gone.
So, this is very tricky stuff. And this
is a huge rejection. Thank goodness I
didn't jump back in it. Now I well so I
did end up doing a dip here at 350. I
thought after a 50cent flush that we
would get a bit of a bounce which you
typically would get and it's now even
after looking at this more carefully
that I'm like I shouldn't even mess with
a stock that has this kind of thing
going on because there's clearly a wall
of sellers. Now whether it's a
combination and again it's speculation
on my part because I don't we don't know
what's going on behind the scenes. We
don't know if that order spoofer is
somehow affiliated with a company and
they are actually selling shares and
they're just being very aggressive in
the way they're doing it. They're using
these pegged orders in which case it's a
combination of but that doesn't make
sense because if you're selling for the
company you want the price to go higher.
You don't crush it like this. So to me
this is a this is a short seller. It's
probably a naked short seller trying to
suppress the stock which is exactly what
we saw earlier in the year. And
unfortunately, if you knock down a stock
like this hard enough, you create this
big red candle and it becomes a bit
self-fulfilling. It kills it kills the
stock. So if you've got enough and now
the order's down there at 32. So if
you've got enough shares to borrow and
with naked shortselling, as we talked
about when I did the interview with the
former SEC attorney about this issue, we
learned that they can basically create
infinite shares and so they can just
sell an infinite amount of stock. So, if
you end up selling millions of shares of
volume, you're going to crush the stock
and then the chart is so ruined, no
one's going to buy it, right? No one's
going to jump into this thing. And so,
it ends up for them being a bit of a
slam dunk. Now, you could say, why fight
them? Join them, right? Trade to the
short side. Well, you know, that's a
consideration. Obviously, some people
are doing it. For me, my feeling is that
it's not worth the risk because what we
have seen, as you well know, are stocks
that pop in one candle 10 or $15 a share
and all of those shorts get annihilated.
And I've been trading long enough now
where I've seen enough instances where
stocks have gone straight up. I've seen
stocks go straight up to over $200 a
share. And one mismove misstep on
something like that could take out all
of my career profit. I'm not kidding.
Everything I've ever made. So, I take
the approach and this is just this is
just me and I'm being a little
conservative here. Everyone's different.
Some traders take the approach of
letting their account balance grow and
grow and grow so they can just take
exponentially bigger positions. So
here's 1 million and then it's 5 million
and then it's 10 million and then it's
20 million and they're trying to, you
know, each time each year 5x so they
make five and they want a 5x to make 25
but they get to 10. They want a 5x to
get to 50 but they get to 20. And
they're just going bigger and bigger and
bigger until you have that one trade
that does something like this. And all
these years of hard work are gone. I
can't do that. I can't I cannot put
myself in a position where that could
happen to me. So, what I do is I have my
account and I grow my account and then I
take the balance down and I put that
money over into a different account. So,
that account is like zero, whatever. And
then here it jumps up and then it grows
slowly in the market. And then, so here
then I grow it again and then I take the
money out again. Boom. And so then I
jump up again here and then this keeps
growing. This keeps growing. So what I
have is a smaller balance in my risky
day trading account and a growing
balance in my long-term account that
benefits from compound interest over the
next 20, 30 years. This account
will obviously increase in value. I mean
there's no question about it. It's just
going to keep growing and growing. So
and I don't have to think about it. I
just let it work. If I was to start
short selling, even with an account as
small as, you know, $100,000, it doesn't
have to be a big account, but with
$100,000, I take one position on one of
those stocks that goes from 5 to 50 in a
in a halt and I can't get out. I can't
unwind it, you know, I'm I'm smoked.
It's 10x loss. I mean, you get one that
goes to $500, you know, or higher, and
we've seen those, too. So my feeling is
that while yes, I could probably do well
for a while, inevitably I would have
that big loss. And I don't trust myself
um
not to get caught in a situ. It's not
even trust myself. I don't trust the
market in small cap short selling that I
wouldn't inevitably get caught in one of
those days and that it would then have a
devastating effect on my
self-confidence. It would be such a I I
just I I look, I'm telling you guys, I
I've seen short sellers who have traded,
you know, basically a a career, a decade
or more in the market, and one bad trade
wipes it all out.
That's a level of risk I can't tolerate.
You know, look, when I was in my 20s,
and the market was different then
anyways, but when I was in my 20s and I
got if I got wiped out like that, I you
look, I could rebuild, but I'm at a
point now where I don't want to start
from zero. You know, I don't mind doing
small account challenges and
demonstrating what it's like to trade in
a small account, but I don't want to
literally go back to zero. I just, you
know, that's where I'm at. And that's
the very real risk with short selling
small caps. And I'm, you know, it's
that's the reality. I'm not making that
up. That's the truth. Let's just check
Jag X. Do you recall Jag X from last
week? Literally last week. Now, this
stock, in spite of the market being
cold, it this thing went from $3 a share
to 60 bucks. I I don't even, you know,
I'm beside myself. I'm beside myself and
I'm on the sidelines. I didn't take any
trades on it. But there are short
sellers who absolutely got completely
annihilated on that move and it makes no
sense. So in any case, right now we're
getting a little bit of these one-hit
wonders like RTO uh was it retox
where you you are getting a stock that
sort of is randomly popping up and
you're getting a big move. This one went
from like 50 cents to 20 bucks and then
came all the way back down to 12 cents.
So, you know, at the end, you know,
shorts were right, but um but for right
now,
sentiment is not strong enough. Um and
so there's two ways that this cycle can
can break and can end. The first is you
have a company that has just such good
news, it's undeniable. Even I mean just
everyone can see it and it's like, "Yep,
this is amazing news. Great. I'm going
to jump on this thing today." So, that's
number one. Number two is you have a
stock that um shorts underestimate and
that the behavior is controlled by
insiders. Usually it's insiders and
those are usually foreign listed
securities cuz it's you're not supposed
to do this stuff. And they're pushing
the price higher. They have a motivation
because they own so many shares to just
pump the stock as high as they can. And
because it's a small float and it's
highly controlled,
they're able to manipulate the price and
push it up. Now, you know, again, you
still have naked shortselling, but uh
which has a real impact because those
are real sell orders going through the
market. So, you know, you you still have
this issue, but if the stock already had
a very low float and the inventory of
shares available to borrow was already
very limited, then that's that would put
a damper on how many shares could be
sold in the open market. So, those are
sort of your two scenarios. really
really good news or you know one of
these foreign listed companies that just
blows the roof off and explodes but
those are also hard to trust because
those are kind of like one hit wonders.
You get it and then you don't get
another one. So it's hard for that to
really create a spark of momentum I'd
say in this market because it's not as
predictable. And and then the third I
suppose would be that we get um you know
that that news catalyst that gave us
that one big move becomes a theme and
then you know it's a catalyst that's
like uh you know a company gets a
contract to do lunar data centers or
whatever mid-orbit data centers and then
that stock goes up like a thousand%. And
then another company's like, "We also
got a contract to be a vendor, you know,
for this development." And their stock
goes up 500%. And they get another one
and they're like, "We're involved, too."
And their stock goes up 700%. And now
the theme is, man, the next stock that
puts out a headline on low orbit data
centers
that's going to go up at least 100%. And
now you've got a theme that you can work
with. And those themes can last for
months. Uh right now we're in between
those themes. And after a really hot
summer, you know, things have cooled off
a bit. And the problem with the hot
summer is that as hot as it was, it
ended with a lot of Chinese stocks with
absolutely no catalyst going up 500%.
And a lot of those became a big win for
short sellers because they had no news.
There was no reason for them to go up
and it was just sort of, you know, they
were up on
I don't know, you know, speculation. And
so the shorts got a big cushion from
some of those reversals. And then that
gave them the conviction to start
getting more aggressive on anything
popping up. And then with that um you
know shorts um start to size up, get
more confident, longs start to get
cautious and nervous. And now you see
how the feedback loop starts to go the
the pendulum swings. And this is what
trading has always been. Oh, by the way,
my P&L for today, I am red $452.86 86
cents red on VBIO, red on LGHL. Um I
it's whatever I like, you know, I I kept
it in check today. Uh so this is fine. I
I'm would have preferred to be a green
day, but um break even would have been
next best small loss, tolerable. It's
not a big loss. So anyways, that's where
I sit today. I'm kind of keeping myself
on the bench. Um you know, and I I got
to wait to see a little more some more
signs of life before I start taking
risk. Otherwise, I'm just I'm burning
money. I'm just wasting money. There's
no point. It's like, you know, I'm
thinking of like The Deadliest Catch,
you know, some of these fishing shows or
whatever. And if there's no signs of
life, there's no point in throwing out
all your pots cuz you know what you're
going to do? They're going to come up
empty and you're wasting time, money,
fuel, everything else. So, you better
just scout out, kind of find where where
things are happening. And if that means
waiting, it's that's better than the
alternative. Neither are great, but one
is is, you know, it's the lesser of the
two. So, anyways, with that, I'll remind
you as always that trading is risky. My
results aren't typical, and there's no
guarantee you'll find success whether
you trade with me or you learn on your
own. The good news is that when you
learn from me, you're learning a
strategy that someone else in the world,
which is me, has actually found a high
degree of success with. It's not a
guarantee it'll work for you, but I
think it's a good place to start. So,
check out the twoe trial. There's a link
pinned at the top of the comments and in
the description. You can check that out.