Has WDCO turned into a manipulative short seller? Level 2 video on USGT’s first dump day

Wilson Davis (market maker ID: WDCO) has acquired a reputation in penny stock land for posting large bids on big pump and dumps. See this Infitialis article on SeekingAlpha and this article on Pumpsanddumps.com. So it was certainly odd to see WDCO come out with huge size on the offer on USGT (a massive spam pump), driving the stock down with offer sizes up to 3 million shares. Are they broadening their horizons? Below is a video of the level 2 and time and sales of much of the USGT drop yesterday.

Note: None of this is to suggest that the firm approved of or ordered any trader to act in an unethical or illegal manner — all I know is that I have seen someone at WDCO posting large bids (and offers in this case).

Note — the music I was listening to at the time is recorded in the video. I made no commentary so mute the sound if you do not like the music.

Disclaimer: No positions in any stocks mentioned. I had shorted USGT but covered that short yesterday and this morning prior to writing this post. I have no relationship with any parties named above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

My thoughts on various brokers

See the video for my thoughts on the various brokers I use. See also my first impressions of Speedtrader and my review of SogoElite. [Edit 6/21/2011 — Subsequent to me posting this video Sogotrade has changed hands (Genesis Securities sold it to Wang) and the borrows for shorts are not good there anymore. I recommend against using Sogotrade.]

Full resolution video

More posts on brokers:

How to borrow shares to short
An introduction to short selling at Interactive Brokers
Interactive Brokers brings the stock loan marketplace to the independent trader

HOD list: How to find stocks breaking out to new highs
My Interactive Brokers Traders Workstation configuration / workspace
How to scan for pre-market gainers using Interactive Brokers

Disclosure: Short 2,000 ANTS and 5,000 HAUP. No positions in any other stocks mentioned. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

HOD list: How to find stocks breaking out to new highs

Are you curious how I find stocks making new highs so quickly. Watch the video as I show and explain the “HOD list” or “high of the day” list.

Disclosure: No positions in any stocks mentioned. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

First thoughts on SpeedTrader

See the video for my review of Speedtrader after using it for a few weeks. Much thanks to Nate of the InvestorsUnderground stock chat for urging me to try SpeedTrader and helping me to set it up.

Disclosure: Short 10,000 BLUG. No positions in any other stock mentioned. I am an affiliate of InvestorsUnderground and Speedtrader. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

How to learn to trade penny stocks

This is my motivational / instructional video on how to learn to trade.

The keys to success:

1. Don’t be lazy. Trading is hard work.
2. Look it up. Use Google and Investopedia and other resources. Read trading books at your local library. I have suggested a few good ones.
3. Don’t believe it unless there is proof. Lots of people lie about trading success. Look for proof that a strategy works before using it.
4. Don’t waste my time (or the time of any other decent trader) with stupid questions … I’m quite willing to help if you have a novel or worthwhile question but I will ignore you if you show that you have not put forth any effort.
5. Anyone who is serious about learning to trade penny stocks should read every single blog post I have written, as well as every post by Timothy Sykes, Tim Bohen, James Krieger, and probably every post by Pradeep Bond. To do less is laziness. A couple other traders who have  blogs that might be worthwhile are BigT and JohnC.
6. If you value your time more than your money, I recommend buying Tim Sykes DVDs (Pennystocking Part Deux & TimFundamentals Part Deux are the best and I own both).

I should note that @investorslive did not say he made $50k on VSTNQ … I was exaggerating. His Twitter feed is annoyingly promotional, though, as he mainly uses it to promote his subscription stock chat. So while he will have great calls like “$VSTNQ is on watch today” before the market opened and it quintupled, there is plenty of “chat is on fiiiiiiiiiiiiiiiiiiiiiiiiiiireeeeeeeeeeeeeeeeeeeeee” type tweets. I subscribe to his pay stock chat room, InvestorsUnderground. If you sign up using my affiliate link you can save up to 15%.

Disclosure: No positions in any stock mentioned. Thinkorswim is one of my brokers. I am an affiliate of Tim Sykes and Investorsunderground. For more details on those relationships, see the terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

My Review of Tim Sykes’ Learn Level 2 DVD

After pre-ordering it two months ago and receiving it two weeks ago, I finally finished watching Tim Sykes’ Learn Level 2 DVD and here is my review.

Conclusion: This is a pretty decent trading DVD but there is not nearly enough video of Level 2 in action. As someone who has plenty of experience trading and trading using Tim Sykes’ strategies, I did not want another DVD of Sykes explaining how he trades. I wanted a DVD of him showing how he uses level 2. So most of the approximately 5 hours of video was needless repetition for me. For someone looking to learn Sykes’ strategy I would recommend Pennystocking Part Deux or TimFundamentals Part Deux (I own both). I could only recommend this to someone who has no experience with level 2 and little understanding of technical analysis who may have purchased TimFundamentals or TimFundamentals Part Deux (the two of Sykes’ DVDs that delve least into technical analysis).

Pros

  • Sykes explains important facets of technical analysis and level 2. He shows lots of level 2 data of interesting OTC BB stocks.
  • Presentation style is good and he is easy to understand. He describes the basics of Level 2 so even someone without any experience or knowledge of it can understand him and learn.

Cons

  • There is very little in the DVD that a follower of Sykes with a year of experience watching level 2 would not already know.
  • Video quality is only adequate. The first 40 minutes or so of disc 1 were shot with Tim in front of a green screen and there is some flicker in the green screen. After that disc 1 is screencast and the quality is good. The sound quality is the opposite: the first 40 minutes are very good and after that it is only okay. See the descriptions of the discs below for details on which parts of which discs are screencast and which are done in front of a green screen.
  • After watching a bunch of Tim’s DVDs, I just want him to be a bit more professional. It is okay to look unkempt and have random crazy analogies and to sing the Cotton “Fabric of our Lives” song, but please don’t have a 20-second conversation with your girlfriend in the middle of the video!
  • I would have preferred a lot less in the way of stock charts and more actual live level 2, especially of Nasdaq (not OTC BB) stocks around key inflection points. Most of the stocks Tim showed on level 2 were boring. I know it is tough to find stocks that are most interesting, but I would have preferred waiting another month for the DVD if that had meant I would have gotten to see more interesting and useful level 2.
  • The stocks that Tim shows on level 2 are either OTC stocks (for which level 2 is quite different than listed stocks) or boring stocks that were not moving much. I would have much preferred to see some interesting Nasdaq stocks.

Disc 1: Intro to Tim Sykes and then definitions and level 2 basics.
Disc 2:
Looking at a few different stocks on live level 2 but also a lot of intra-day and multi-day charts. This was mostly done in front of a green screen.
Disc 3:
Some random stuff about trading stocks, some level 2, Tim trading IFNY (an OTC BB stock) and showing its level 2. Half of this disc came from one of Tim’s weekly Livestock shows. Unfortunately Tim spends some time answering random viewer questions (not related to Level 2) during that segment. 75% of this DVD is green greened, 25% is screencast with Sykes in a little video box.
Disc 4: The first part of this disc does not have level 2 info, just stock charts, with Tim talking about fairly basic technical analysis and technical trading strategies he uses. I like this part, but he should have waited until the right time to record level 2 video to support his various patterns like the “cliff dive.” I do like that this disc is screen captured.

A Gratuitous Level 2 Screencast (recorded by me with little commentary)

Disclosure: No positions in any stock mentioned. I am an affiliate of Tim Sykes and earn a commission if anyone purchases his products through my links. I purchased the Level 2 DVD from Tim Sykes and I own many of Sykes’ DVDs and have certain business relationships with him. See my terms of use for full details about my business relationships with Timothy Sykes.  This blog has a terms of use and you can find all my disclaimers and disclosures there as well; my full terms of use is incorporated by reference into this post.

Hide your order size by using iceberg orders at Interactive Brokers

When trading large blocks of shares, particularly in illiquid stocks, it helps to hide the number of shares in your order. You can do this with what is called an iceberg order. The video below shows how they work in Interactive Brokers Traders’ Workstation as I try to cover a large short position in an illiquid stock. You can learn more about all complex order types at IB by visiting their order type page.

Disclosure: No positions in any stock mentioned. This blog has a terms of use and you can find all my disclaimers and disclosures there as well; my full terms of use is incorporated by reference into this post.

Why I don’t like to short stocks at 52 week highs

This video is for everyone who sees a stock at new highs and immediately thinks it should be shorted. That is not a good idea. Stocks that are at 52 week highs tend to keep going up. I like shorting things that go up, but only if they go up a lot very quickly (like 100% in three days) and then I will only short once they start to fade (I particularly like to short once they go red on the day in the afternoon after fading gradually).

Disclosure: No positions in any stocks mentioned in this post. I have a disclosure policy and you can find all my disclaimers there as well; those disclosure & disclaimers are incorporated by reference into this post.