Trading to trigger stop loss orders | Recent Trades - Last 10 of 470 | More trades... |
| 11:00:42 | D | 0.92 | -0.02 | 90 | 7 TD Sec | 7 TD Sec | E |
| 11:00:26 | M | 0.93 | -0.01 | 83 | 1 Anonymous | 14 Virtu ITG | |
| 11:00:02 | O | 0.92 | -0.02 | 500 | 1 Anonymous | 2 RBC | K |
| 11:00:02 | O | 0.92 | -0.02 | 500 | 1 Anonymous | 1 Anonymous | K |
| 10:59:47 | O | 0.915 | -0.025 | 500 | 1 Anonymous | 1 Anonymous | K |
| 10:58:52 | D | 0.91 | -0.03 | 153 | 80 National Bank | 80 National Bank | E |
| 10:57:40 | M | 0.93 | -0.01 | 5 | 80 National Bank | 80 National Bank | |
| 10:57:25 | T | 0.92 | -0.02 | 500 | 85 Scotia | 2 RBC | K |
| 10:57:25 | T | 0.92 | -0.02 | 500 | 85 Scotia | 2 RBC | K |
| 10:57:25 | T | 0.92 | -0.02 | 500 | 85 Scotia | 1 Anonymous | K |
Stop loss hunting trap (small bait for big tuna)
If you watch daily trades on stockwatch you will understand the mechanics behind short selling. Hedge funds walk away with billions every year from hard working Canadians trying to prepare for their retirement. They place orders as little as 1 share at decreasing prices until the price drops significantly enough to trigger stop loss orders that some unsuspecting retail investors automatically place to protect their downside. Example: I place 15 sell orders at strategic times (when liquidity is very low, at the beginning or end of the trading session)
1- sell 50 shares at 1.77
2- sell 50 shares at 1.75
3- sell 50 shares at 1.74
4- sell 50 shares at 1.72
5- sell 50 shares at 1.71
6-sell 50 shares at 1.80
7-sell 10 shares at 1.68
8-sell 50 shares at 1.67
9-sell 50 shares at 1.65
10-sell 50 shares at 1.62
11-sell 50 shares at 1.61
12-sell 1 share at 1.60
13-sell 5 shares at 1.66
14-sell 1 share at 1.65
15-sell 12 shares at 1.60
By sacrificing a few shares at a discount hedge funds can trigger the sale of thousands if not millions of dormant shares owned by naive retail investors who placed stop loss orders on them and that brokers and short sellers are happy to scoop up to cover their shorts and hoard them for when the stock starts rising up again.
Short sellers use derivatives like put options to manipulate the underlying stock.
Imagine that I assume that there are enough shareholders that will be easily shaken out if the price is low enough for an extended period.
Let us call my hand a “strong invisible hand ” and those I am planning to push out weak hands.
Let us assume this one strong invisible hand will take on 20,000 weak hands(weak because of lack of resources, information, experience...). As a strong hand my favourite game is shorting stocks both directly (2 to 5%) and indirectly using put options 95 to 98%) and I have been been playing it for decades squeezing and crushing the weak hands. The game goes like this:
- I dump a large order of 50 million shares for $6 a share
- A few months later I sell short another 30 million shares for $5 a share
- A few months later I sell short 10,000,000 shares for $4 a share
- A few months later I sell short 5,000,000 shares for $3 a share
- A few months later I sell short 3,000,000 shares for $2 a share
- A few months later I sell short 2,000,000 shares for $1 a share
- At the end of this special operation (bear raid) spanning many years my strong hand would have sold short 100 million shares for $513, 000,000 ($5.13 per share on average) bought by some 20,000 retail investors who are now faced with two options :
1- Surrender to my shakeout and sell for $1 and realize their paper loss.
2- Realize I am a financial bully fishing for liquidity and hold the line against my wish until I get squeezed for thinking I could squeeze 20,000 hands.