You need to familiarize yourself with the market makers (and if you're using Alphatrade, always work with the arrows ON)
UBSS, ETRD, and SBSH are 'retail' market makers, that is, ordinary joe blows trading through Ameritrade, Scottrade or Etrade. You don't have to worry about them.
There are so-called 'institutional' market makers like SALI, SEAB, CFGI, SGTI, VERT, VFIN, HDSN, MICA, LAMP, or now RBCM, who sell for hedge funds, and/or the company. They are selling new shares, dilution, into the run. That will kill a run faster than anything, and diminish the PPS in a heartbeat. Just see where a few of those stocks are selling now, compared to those L2s, to see the effect of dilution on a PPS.
When people see HDSN or VFIN as the "axe", that is, the lead seller on the ask, they know that's a bad sign. But often, when they see him supposedly on the bid, looking supportive, they get excited.
What they don't realize, is that the people wanting to sell shares, know our psychology. They know that penny traders like to think that some institution out there is buying shares in their penny POS. Yeah right! Believe me, very few institutions will touch any stock under $5, most won't sneeze at a stock under $17. So trust me, they ain't buying our .005 pinkie! But they know we like to think so, and so they show up on the bid to 'paint the bid'.
When regular traders (like SBSH) see HDNS and NITE suddenly upticking their arrows, and joining the bid party, it tends to make them raise their bid, to outbid the competition. That's when you'll see a 'retail' MM like SBSH (who often represents Ameritrade) raise their bid.
Getting retail to raise their bid was an intentional act. It's as if I'm auctioning off a product on Ebay, and I get my friends and family to bid as well, and out bid you (the mark) to get you to raise your price. Of course my friends have no intention of buying the product, they're just there to trick you into paying more than you might have otherwise.
I'll do my best to explain more, but some of these you have to learn by watching daily, and seeing what happens after certain patterns appear.
Regarding why we distrust VFIN and RBCM, you have to read and re-read some of the articles I've posted here on PIPE financing on this board, to understand why we are so wary of hedge fund sellers in this game. So many of these stocks are strangled at birth by the loan shark financing they're forced to resort to, what's known as 'toxic financing'. Most of these stocks don't stand a chance, even if the CEO truly wanted to succeed. It's the difference between people with good credit, being able to finance a mortgage for 5%, and those who must resort to sub-prime and forced to get adjustable rate mortgages which start at 12%. Pinksheets and pennies are the sub-prime financed companies of the stock market, and the PIPE financers are the loan sharks who call the shots.
Oh yeah, I forgot to mention short sellers. They're in this mess too, and one more factor you need to account for.
There are so many ways you can lose money around here, it's not funny!
Yes, we can have fun, but never forget this is a heart attack serious game. These characters can and will wipe you out faster than you can phone in a trade. They have absolutely no qualms about lying to your face. Many of these scammy CEOs are pathological liars.
It's better to start off not believing a single thing you read or are told, and wait to see who is trustworthy over time. People's track record becomes clear over time. In the meantime, trade small sums until you get a feel for your trading style, and how to read the smoke signals.
Hope this helps, and good luck!
