Rigged small cap stocks, part four
Manipulators tactical toolbox
Just as within any other process that involves the manipulations, the market maker within the small-cap stock will use common manipulation tactics to achieve its end goal. Because the chart and price data is very mathematical, which neutralizes all the psychological aspects, rendering every human participant into just 1s and 0s on ticker it makes those tactics hidden in plain sight for many, but if one starts to overlap the same kind of behavior over sample after sample, the common underlying tactics become clearer. The tactics only become clear once the same kind of patterns are placed back to back, as within a single pattern the tactics might seem deceptive, but they become clear at the repetition.
Lets lay out some of the micro components that rigger will essentially use on the manipulated asset to achieve agenda, piece by piece those will be layered together to form a very fluid motion of deceptive behavior:
One of the common manipulation tactics is to over-exaggerate the short-term reality. There can be many reasons why manipulator might want to pursue such tactic, either to force the recency bias on targets ("I thought this, but now that this has changed so strongly, perhaps my initial view was completely wrong"- thus shaking the firm ground of such participant).
An over-exaggeration might be as well setting a very obvious strong view that is just completely obvious to the majority of participants, creating a forced "magnetic" draw of opinions after such an event happens. Masses will be drawn together at over-exaggerations (breach of very clean-strong price levels for example).
Such example might be a strong push all of sudden on high volume (on the rigged ticker), a very common tactic that rigger uses, often with agenda to set a trap (obvious strong push to lure in chasing long liquidity and short covering liquidity, rigger unloads his position into such traders, and then pulls the rug on remaining size).
Be aware when on the rigged ticker, the move comes out of nowhere and is very obvious, and very exaggerated. It could either be the start of initiation-strong continuation or completely the opposite of that. It usually is not somewhere in middle, it's either-or, on rigged ticker, either black or white, not gray.
Example of such very exaggerated move out of nowhere, followed just few minutes with complete rug pull on ticker JFIN:
Always ask yourself, why would the initiator want to be that obvious? The answer will always be either black or white. It will either mean a further strong continuation of the move or complete opposite of that and it will result in a rug pull soon after. Those exaggerated moves have their purpose, in most cases to trap.
Another common tactic used by manipulators is fear. Once the participant traders might have the fear mentality, the competitiveness drops (quality of strategic decisions), and they become susceptible to be lead by rather than being the leaders of their own actions (instead of plan-execute they become react-execute, deer in headlights). Meaning the rigger will then became initiatior and start to control the actions of such traders more likely than not.
Riggers tend to use this approach by creating chaotic behavior on an asset through the day, which by default places traders into a very uncomfortable and scared mindset ("what is going on?"), and then once the rigger initiates those traders will be more likely to fall prey to the liquidity traps of the rigger.
Observe your mental strength when you trade rigged ticker, no this is not just a bunch of psychological high school theory, this is exactly what you should be actively aware of through your trading day on such tickers, you need to be aware of how much inline of the "cold-steel" are you.
Or to put it into the quote of:
"Calm, but alert.
Relaxed, but steady.
Smooth, but sharp.
Humble, but confident."
Know for yourself how much inline are you with the above, if outside of the balance, you are that more likely to become susceptible by fear and play into rigger's hand.
Every trader should be reactive, however, there is a big difference between being fully reactive with no plan, or having a plan on the expectation of what rigger might be playing on and being adaptive/reactive along with the plan. Make sure you are not trading within the mindset of first. If you are completely reactive with no plan, the fear will be a large driver to your actions, especially as the unknown exaggerates it.
3. Control over the situation
Perhaps the key leading aspect of manipulation will be for the manipulator to have control over the situation, or what could be identified as "initiating the dance". Meaning such manipulators will create specific forms of micro behaviors so that all the other participants start to dance along with that tune, and for that the rigger needs to absorb enough liquidity on the ticker to be able to influence the price. Rigger cannot have control over the asset without absorbing enough liquidity and cannot influence traders' decisions or liquidity traps if he is not carefully guiding/moving the price at the right levels to "take the dance of the asset under control". He has to take control over the situation, else the traders will not react, if the asset trades "too organically".
A trader should be aware of how big the float on the ticker is, to estimate how many shares roughly the rigger needs to absorb to start influencing the price moves (usually at least 30% of float), and as well observing the volume traded and comparing it to the float of the ticker, to identify how much could there be organic versus rigger liquidity trader per each minute, as this will give trader more insight into how much control rigger might have. In some cases if the ticker gets a huge amount of interest it might be impossible for the rigger to absorb large enough liquidity on the asset to get control over it as there are too many organic buyers and not enough sellers, thus he will be unable to take control.
Float versus volume traded per 1 minute on ticker is a very important component that traders should always be aware of on rigged tickers. The relationship between those two is what opens or closes doors to certain scenarios.
And always keep in mind it is all about the relative relationship, not the absolutes. Float number without volume counted in will not tell you much. Or the volume itself without knowing the float. They both have to be weighted against each other. Absolutes in trading play little role, as the situation and market conditions are changing what really matters and provides you insight are relationships between relatives, as those are adaptive. Nothing is static.
Lets take three basic guides of Machiavellian approach to game theory:
Views: The belief that the world can be manipulated - the world consists of manipulators and manipulated.
Tactics: The use of a manipulation strategies needed to achieve specific power situations (goals).
Immorality: The disposition to not become attached to a conventional moral.
The issue that many traders have is that they completely neglect either of those three components even as being present at high frequency on small-cap stocks, they assume that stocks just trade within their organic bullish or bearish patterns, if buyers are stronger stock goes up, if sellers are stronger the stock goes down, meanwhile they completely miss all the hidden mechanics of the manipulated game that often are present on the ticker in front of their eyes.
-With "views", many do not even think about small-cap stocks as sometimes being manipulated. They just see tickers as faders or rally-ers. Do not fall for such a simplified view. Some tickers trade with organic orderflow, and some have large player mixed in between.
-With "tactics", many are not aware of what the agenda for rigger on ticker might be, they can perhaps identify ticker as being manipulated but they have no ideas or insights on why that might be. Make sure to reverse engineer manipulated tickers in hindsight, look at what happened on those tickers after, 2 or perhaps several days later. Check fundamentals, fillings, price action, did ticker fade, did it not, everything. By reverse-engineering, you will start piecing together the reasons for the end of the day agendas on why manipulations happen. In some cases of course in many other cases the whole reason will still remain a complete mystery, and that is okay. You are not here to figure out each and every stock on why it has moved, or where it should move, some puzzles just take a lot more time to figure out.
-With "immorality", many traders tend to use excuses too much (also seen in political opinions) where the one on the opposite side will cast the blame on the other side. Mind that the game of manipulation in stocks is a game of lion and the gazelle, and nature cares not about the reason of why the gazelle falls prey to a specific lion or why the lion starved because it was unable to catch the gazelle. Do not seek answers in moral compass on why certain stock made some irrational move, moral compass will not provide you any insight into strategic game whatsoever. The more you keep opening the moral compass up, the more you are distracting yourself without providing any real insight into the tactic.
Riggers do not use the compass of morality ("this company/stock does not deserve to be pumped at such a high price") so do not use such compass to justify what stock might or might not do, or the rigger for that matter. Do not use tools that the initiator is not using in the first place trying to figure out his intentions, because you will fail each time doing so.
This is a very crude outline of some of the components that the rigger will use on the ticker to piece together the whole dance of manipulation through the day, each candle on the chart will be a collection or a piece of certain tactics outlined above.
Start with observing organic versus non organic behavior
For beginner traders spotting the concept of rigged or manipulated stock behavior might be difficult, it is something that takes practice and an understanding of how liquidity pockets in the markets work.
Ideally trader should focus in the early stages on just identifying where the stock's behavior might be organic or the cases where it might be inorganic (artificial). This is the first step to identify where a large player is/might be controlling the liquidity on the asset, even if the trader is completely unaware of the direction that manipulator might try push the asset to, it is the first foundational piece that one needs to gather, just to tell the difference between organic flow versus non-organic.
By organic, it is meant that the ticker has a very even distribution of smaller traders and larger traders (and orders), and the stock trades in very smooth price moves without any major hectic bursts or drops out of nowhere. While the artificial is pretty much the opposite of that, where the large portion of liquidity on asset is controlled by a single trader, creating hectic quick price spikes or drops and very asymmetric price action. Level 2 / time and sales on such tickers will be as well often very asymmetric in terms of the size of orders minute by minute.
Let's take quick example of how could price action look on the chart between organic versus non-organic flow on small-cap stock:
Behavioral anomalies of asymmetric moves will be the key tell-tell to indicate that the price action or order flow on the ticker is not organic. Especially true if the time and sales window have a large bell-gap-bell-gap-bell-shaped flow of the big share orders-low share orders going through. Inorganic action the order flow coming through should be more even, and the time and sales should be more linearly curved, with anomalies only here and there.
Example of the organic chart on ticker below:
Example of non-organic / artificial chart on ticker below:
Due to this, my preference when trading with fellow traders is to use the basic image highlight, when such non-organic behavior is first spotted with relative consistency, to place this image in front of everyone, to get everyone on the same board:
Rigged behavior ON:
As mentioned above, if one is new to rigged tickers, the first critical step should be just to identify where the price/order flow on the ticker is organic and where it is artificial, if this first step is done right, the rest of the agenda become easier to identify (not easy, just easier). And by "relative consistency" it is meant that it is not just enough for ticker to display un-organic behavioral anomaly once, it has to be done several times to confirm rigged behavior, indicating that it is not just a fluke, it has to show that rigger indeed is tossing the shares / liquidity on asset back and forth, actively accumulating and distributing and accumulating back again. The more this un-organic behavior keeps repeating its anomalies, the longer it indicates that rigger is still likely to present. Or as soon as such behavior dries out and is no longer present for 30 minutes or more, chances are, the rigger might be done, and the organic order flow will then take control over the asset. In many cases this means that the ticker will fade. It is statistically more likely that if the ticker was rigged, and the rigged behavior is no longer present for while, that ticker will then tend to fade, especially if there are more than 2 hours until the market close. Very important data to keep in mind. To summarize: Game ON followed by game OFF= fade likely.
The reason can be found in orderflow, if the large player was responsible for holding more than half of assets liquidity and demand, to keep ticker "afloat", once he is gone, chances are the supply will outbalance the demand, thus fade will have a higher chance.
Anything that is sustained artificially against the laws of nature or supply and demand will return to its neutral previous state sooner or later if "the rug of artificial propping is pulled". Example of rigged ticker trough entire day, where the rigger eventually pulled the rug, signed OFF from game, and the organic supply (trapped longs) did the rest on ticker CLPS from February:
When behavior is too symmetric (too repetitive for too long), be aware of the trap!
Many animal species (even those more primitive ones relative to primates, such as fish or lizards) have a portion of the brain (or certain functions) dedicated to understanding and observing symmetrical behavior. There are many reasons why, but symmetry in nature has a major function, not just physical symmetry but behavioral as well.
As for behavioral symmetry, most animals have their dance rhythm to the behavior, each species with their own flow, and very often the predators (such as lion or other explosive animals), have strong asymmetric patterns of aggression accompanied with them, and it is the task of other animals within such ecosystem of those predators to have a read on behavior to avoid being their prey. This is one of the reasons why many animals are well in tuned to listening to the behavioral symmetry (not just of predator, but their own group as well to spot the hints from disruptions in behavior as potential signal of flight) so that as soon as there is a strong disconnect, it might signal something potentially dangerous or just perhaps not dangerous but unusual (and nature often classifies unusual=uncertain=might be dangerous even if it is not meant to be).
This behavioral observation is usually automatic, an animal does not need to think about this actively or obsessively, it is something that is done by the oldest (reptile) function of the brain and it is activated on autopilot, however, this is where it becomes a positive and the negative at the same time. The positive being a very low calorie/processing power cost (leaving plenty of thinking space for other more important tasks that need qualitative thinking), but the negative being it is pre-programmed on auto function, which might pull the animal into agenda situation without agreeing on it, lured by the opposite animal, if that animal is aware on how to use this function as a trap! Basically the animal is steered by autopilot into dangerous situation without even thinking to take control over autopilot and recognizing the danger.
The process above is how the riggers use this very much similar process in small-cap stocks, with the only difference being - that it is done at much more sophisticated and complex level compared to regular animal-to-animal behavior.
Be aware of symmetric - repeatable behavior on rigged tickers that remains consistent for a too long time in very even matter, chances are it might be followed by an opposite move, as it is being a part of the intentionally set trap. For that, the behavior has to repeat in exact and even matter for as many times in a row as possible, the more times, the better. 3 is usually not enough, generally, you want to see the number above 5X.
Lets take an example of such long trap on rigged ticker ENVB from March:
Another example on ticker AACG with very even walk up and then pull soon after with price never returning to the rigged demand level:
Also, keep in mind, try not drawing trendlines too much to spot key behavior change because often price structure will not be symmetric enough to draw the consistent line, instead focus on the repetition of behavior itself, when the current behavior is no longer inline to previous, using the flow of highs and lows and the initiations/pulls as a guide (use volume as well):
When the rigged behavior is present on the ticker, and the ticker displays very symmetrically consistent progress of price behavior it is likely that rigger is eventually sooner or later pull the price in the opposite direction of the consistent symmetrical behavior (for example stair step up, step up, step up- then pull down strong).
This is the core behavior used to absorb the counter liquidity which the rigger will eventually trap and use as fuel for his own filled position:
-rigger "paints" upward clean trendline, fill short and then pull, using trapped long liquidity as fuel for downside to maximize as deep fade for his short as possible
-rigger "paints" consolidated range with lower highs, accumulate long then squeeze and unload the long position into short covers that were lured into range by the even symmetry of progression of weakness (lower highs).
Decreasing traders alertness by producing unusual behavior
Using chaotic or very unusual/ asymmetric behavior can as well be there to distract the opponents and set a trap. Many animal species use such tactics as a cunning way to lock in the opponent as the frontal lobe of brain starts being occupied with questions "What is going on here?" which decreases the sharpness and alertness of such animal, leaving it exposed as the brain is occupied with useless task activity. It is not just about distraction, the aim is as well mental burnout, one reason why rigger places those whipsaw unusual moves is to drain the traders as the day progresses, especially if one does not place the unusual move within the right historical context (been there, seen that, done that, not gonna get me).
The tactic shown above for weasel is exactly what the riggers use on tickers where they display very irrational price moves with quick pushes and pulls, distracting the traders in the chaos of erratic price moves, decreasing their alertness level of having a large picture in mind, instead of occupying them with short term picture instead, lowering the guard.
The moves of the weasel if stripped out of context seem ridiculous or without any purpose, however, if one overlaps a specific end-goal or result over many samples, then the whole behavior makes complete sense a lot more.
The same approach is what trader has to do when taking into context the rigged micro behaviors. Do not be one of those traders who sees irrational move and the first word they find refuge with is "this is crazy", instantly as you do that, you admit you have no context. Crazy is anything stripped out of context. But placed within context many "crazy" strategies in historical warfare were completely intentional to achieve the specific end goal, just as the behavior of the weasel above would fit in the same scenario. Look at the chart example of PRQR on the start of article as such example.
To illustrate what was said above for manipulation toolbox mechanics, and how this expectation of symmetrical behavior works, or certain chaos induced techniques, and how one can use this as a trapping mechanism against other players, let's take the example of the video game Mordhau.
In the video there is an outline of 3 tactics (have used a very simplistic gameplay approach on each of them, just to highlight the core trapping mechanic for sake of video) that riggers use as well in small-cap stocks:
1. Creating consistent symmetrical-repeatable behavior to get the player used to it (auto response, unconscious mind), and then swiping with an asymmetric move to cause a panic reaction.
2. Using chaotic unusual attack and footwork moves to occupy opponents mind with "what is going on" and decrease his sharpness, basically stealing the tactical lead from the opponent and make him subjected to my initiation.
3. Using sustained pressure to "control the situation", the reactive player is much more likely to walk into traps as he does not have control over the initiation (deer in headlights effect, opponent gets fully focused on blocking instead of playing the offense as well).
All of the three outlined approaches are what riggers use on especially Type 1 trap (outlined on previous articles), however, all of the three tactics are well mixed into the soup through the entire day (probably with the help of algos they manage to create a very fluid agenda).
The video below shows how if one is the initiator and is "setting the pace of the dance", it is possible to create a fake symmetry of behavior with intention so that the opponent starts to expect this behavior to repeat, while the next move just after he settles for such repetition is actually the complete opposite of that, which often triggers opponent into the panic reaction, de-railing his focus and destabilizing his sharpness by a large amount.
This is one of the tactics that rigger will use on small-cap stocks to burn as much mental capital of the trader through the day, agitate him as once this is set in motion, his panic-out moves become more frequent, the quality of executions drops, and such trader will most likely become easier liquidity target for a rigger (stopping out longs into washes just before reversal, and stopping out shorts into top ticking at highs).
To note, the video above might not provide anything significant of value to experienced Mordhau players (but since this article is aimed towards traders that is fine), because those "traps" can be figured out sooner or later with enough repetitions. The reason is that the structure of the game ("dance") itself is not that complex, essentially there is a limited combination of attacking/blocking and strategic combo moves that one can execute, which means that every pattern, eventually becomes very repeatable and not that difficult to find out if player dedicates enough hours to game.
-left strike, left strike, block, right strike. (X, X, Z, Y)
-left strike, step back, block, right strike, feint, right strike. (X, ZZ, Z, Y, YY, Y)
Because the layers of the game are very crude (basically just a combination of 3 basic moves) the traps can essentially be figured out by enough repetition, even if the player is playing the game on complete mental autopilot. By that I mean, even if one is listening to music, playing tired, not placing any thought into the tactics, with enough repetition the "dance" and combinations become quickly apparent as patterns, it is all about figuring the opponent's style and what kind of patterns he/she likes to use (adding "she" to be "politically correct", but in reality population in game is heavily male tilted, just as trading is).
Every player will have his unique approach, even though that the core of game remains the same, every player has his own behavioral footprint, which means that the more you engage with that same opponent the more likely it will be to figure out "his/her dance style".
This leads to being the conclusion, with enough time spent (100 level rank) and very little thought placed into the mechanic's majority of players (80% plus) will figure out all the traps that opponent players try to lure them in, even if playing on "autopilot" as mentioned above.
However now let's look at the other side of the table, the trading of rigged stocks. Here the statistics tilts into the opposite side of the direction. With the same amount of time invested into observing the small-cap stocks, how many traders will figure out the moves of initiators and the tricks they play on them? Less than 10% (i am using aproximate same hours spent in playing Mordhau versus actively trading small cap ticker, so 1:1, for example 1000 hours vs 1000 hours).
The answer is hidden within the differentiation of the complexity of the rigging game in markets, which is much deeper and the combination of moves or the actual behaviors of stock tickers across the past 200 samples will be much more chaotic relative to the Mordhau itself. And to figure out the traps in such stocks, one cannot just operate on "autopilot", you do need to input some serious thought into what kind of game the rigger might be playing, you need to place significant time into research, it will not just all click automatically.
However with that said, both games share very similar core, being relatively simple on the face of the surface. 3 moves in Mordhau, and 3 different scenarios to small cap stock moves -1. a rally-er, 2. fader, or 3. choppy ticker. But obviously, that will not apply to rigged tickers, just as it will not apply to cunning Mordhau players, as there the game is all about complexity, feinting, deception, and all the micro-tactics outlined above. The basic core gets quickly then stretched into something much more conceptual and complex, harder to read, which is what the rigged games are all about.
Both Mordhau and small cap rigged stocks in such cases will therefore share very much the same concepts on the core principle level, but the complexity and difficulty will be different.
One downside might be that for those who have not played Mordhau perhaps a lot of what has been said above about tactic might not make much sense from the video itself, since one needs repetition to get the idea on what to look for, but since the analogy stands very well tied to rigged trading i have decided to include it non the less.
The key takeaway from the explanations above should be:
-When the behavior gets too symmetric, for too long, and you are the one being reactive (not the initiator) you should be aware of that because chances are, the trap is in the making against you as market participant, if you are on the side of repeatable symmetry. Expect the opposite-counter move soon to follow.
-Be on guard if the player or ticker (rigger) is displaying highly chaotic behavior, it will be most likely on purpose, not random. Try to figure out why, what could the actual directional agenda in one or two hours be after those chaotic moves? Who was liquidated, who was not yet?
-Be on guard for fake aggressions, as too obvious aggressions are often met by "YOLO charge" resulting in instant flip/end. Often rigger will initiate with highest bullish volume very high into extended price move just to be followed next by complete rug pull. Strong volume initiations at very high extended prices are often fake (one last gasp of air to lure in chasing liquidity as trap).
Examples of fake aggressions into high prices after extensions in order to set liquidity trap:
All of such behaviors can be observed in Mordhau and they very well translate to rigged small-cap tickers as well, or one could just as well study those tactics in history of warfare but often history can be too plain, too theory/book oriented or just too high-ground for regular person to connect to, while video-game can provide you much more in-lined action experience that is more similar to what trading is (game theory in realtime instead of dried out history).
If you took all that was said above or shown in videos and ask yourself: How is then this rigging activity playing against me as a trader? Riggers intention is to pre-disposition trader towards the symmetric dance on the asset because the "painting" of symmetric behavior is what rigger will use (just as the video on Mordhau shows as an example) to force-suggest trader on where they should stop out. Once the behavior is repeated enough times, the traders get used to further expect the same behavior to repeat and usually the stop losses or the panic-exit actions will be at the exact opposite of that symmetrical behavior expectation (basically traders will stop out once the symmetry is ruined with violent move - invalidation) which is exactly how the rigger will play on creating that "panic feint" move (without traders realizing they are sucked into the lure initially before such move acours).
At the bottom of everything said above, the riggers game is all about manipulating traders behavior. First by pre-disposition them into the dance (without them knowing) and then using "feint" or asymmetric moves to trigger the key responses at precise liquidity levels at precise hours by rigger.
Example of force-suggested symmetric behavior and "chart painting" by rigger for Type 1 play (its all about that 1-2,1-2,1-2,1-2, boom 4 type of behavior):
Forcing symmetrical-repeatable behavior is a large component of rigged activity, no matter if it's a short trip or a long trap. For the untrained eye, the difficulty might be telling the difference between force-painted symmetry and the organic symmetry that the market forms on a specific asset. To come to the right conclusion on that, make sure you read the whole article and all the critical step by step hierarchical points (identifying artificial vs organic behavior, asymmetric price moves (spikes, flushes), price structures leaning towards Type 1, etc) make sure that it all lines up. It is important not to confuse the process where the trader just sees a symmetrical triangle in price structure on a random asset and starts to assume there is a game being played in the background. The asset has to display rigged behavior, organic assets do not count for what is mentioned in this article. By organic it is meant that supply and demand are well balanced and distributed across many market players and there is no major player that holds a large portion of float on the ticker, controlling the price.
Protecting the untested liquidity on backside of ticker
Untested liquidity or in the money short positions on backside of the move are one of last liquidity hunt areas for ticker. Just when the action on ticker is about to dry out at middle of day often the rigger will create one last trap before pulling remaining of his size out of the ticker. The target of such liquidity hunt are chasing short sellers on backside of the move. Ideally the rigger will want to walk down the price in careful manner so that short liquidity never panics out until that one last moment, where the rigger finally trigger crowd response from as many traders at once as possible (after the structure already consolidates for hour or more to draw/absorb enough traders in).
If panic is triggered all at once, it enables the rigger to unload at the right moment into the fast-moving tape. The quick speed and action of tape is what rigger needs to get rid of large position size, idle and slow tape is no good, as in case of slow tape/action rigger has to flush trough weak liquidity at the loss. This is why on backside clearouts if one records the tape there is a noticeable increase of speed of the Level 2 / order flow right at the key initiation through the backside clearout. Key range highs break, and crowd behavior of traders initiates (short sellers start to cover at loss expecting the price to now go higher, and longs join in expecting a breakout to sustain, thus increasing the overall speed of the tape, compared to previous 30-45 minutes on backside).
Watching changes of the speed on tape transactions at key price locations is often more important (more insight) than watching what size is stacked on bid or ask, or what size went trough on time and sales window.
If rigger keeps shaking the liquidity out at micro moves too frequently it might be unable to cause enough panic to unload the size, it is much more effective to trigger as many traders to panic out at the same moment, as it is easier to use the tape liquidity - focus to do so then.
Time spent on holding position- mental capital burn- the likelihood of panic reaction are all linearly correlated, meaning the more time that trader is in the money on position and the more time it passes, the more mental capital has likely been burnt (especially if in the money only by a little), so if rigger pushes price against such trader to then be caught in negative P/L all of sudden it is more likely for such trader to then get frustrated as the mental capital has been already drained.
A trader who is fresh in position is slightly less likely to be shaken out. Which is why usually for backside clearouts rigger will "paint" the consolidation range over at least 1- 2 hours so that traders get tied to their positions for a while before triggering key squeeze move.
To illustrate the concept of "protecting the in-the-money short liquidity", the rigger needs to ensure to always sell at supply levels (near highs) to paint keep shorts ITM and only prop at the lows.
This concept has been laid out under backside clearout explanations on other articles as well.
When "counting" protected backside liquidity, always make sure you start measuring / counting it from the last major wash, as that is where the short sellers might start to participate:
The reason why trader should always have this liquidity in mind is because riggers will target often this in-the-money short liquidity with backside clearouts (stop-hunts). It is important to be aware of that so that one does not top-tick stop out short just when the rigger actually pulls the rug after backside clearout!
Much about backside clearout has already been written in previous articles, this is just to update on the concept with some fresh examples from recent months, and to further explain the topic.
Measuring backside liquidity and short seller participation into weakness since last strongest flush (and the start of backside) is the key concept that trader has to grasp. Some tickers will have single backside clearout, while others might have up to three or four, it completely depends on how actively the ticker trades (speed of tape, activity of overall participants). The general rule is, the stronger the volumes and the more liquid the ticker is on backside the bigger the backside clearout might be or the more frequent it might be. Opposite of that being, the drier the ticker is on backside the more likely it is there will only be a single clearout (if even that) as there is not enough liquidity to shake out for rigger.
To understand the concept of backside clearout put yourself into the shoes of traders who participate on the backside with short positions, who add to the winners as the ticker is fading, or just in general start shorting only once ticker shows weakness (to avoid frontside shorting). Think of where such liquidity is positioned on backside of the move:
Keep those variables in mind, those dictate higher likelihood of backside clearout happening:
-very liquid ticker on decent volumes traded still at the backside (liquidity does not dry out even that ticker is no longer pushing)
-ticker still is up a decent % on the day, still, plenty of gaps to fade, meaning many shorts are likely holding for deeper fade
-the more symmetric the range the more likely the rigger is painting it intentionally so that the key breach will be very noticeable to create panic covering at mass
Some recent examples of backside clearouts:
Keep the end-result data in mind: In the majority of cases after backside clearout and rug pull, the ticker will breach the range lows and fade lower. Very key data to keep in mind, to not cover short too early, be patient and wait for lows to give up is the right to do, not always but on average, especially if liquidity dries up significantly after rug pull.
It should be however stressed again as very important, this rule of thumb only holds true if liquidity does dry out after backside clearout followed by rug pull. After such a case the liquidity has to dry out 15 minutes after for a deeper fade target (and breach of lows) to be valid and to fall within that "majority" sample base.
Such example on ticker DYNT:
Be on guard for when the backside clearout morphs into Type 3 EOD squeeze. Listen closely to the time windows of backside clearouts. On average statistically, the lows need to fail (break) about 30-60 minutes after backside clearout for fade to be still in play, if they do not chance towards Type 3 start to increase. Keep this time window correlated to statistical data in mind. Chances for this to happen are relatively low, as Type 3s have under 10% occurrence, but they do happen (check other articles to get familiar with Type 3 pattern).
Such example on ticker BNTC below:
Ideally after backside clearout, the liquidity on asset should dry to indicate that there is no further intention to push ticker high and that the breakout was just a fakeout, indicating move lower, as per backside clearout rules (lows likely to give up), such example on ticker CDXC:
Backside clearout example and fade after clearout was completed on ticker NCTY. Ideally trader should short into clearout, as long as there is high volume at clearout, tape speeds up, and the microshelf holds with price unable to push. Re-read the article from start to finish to know how to place those variables into practical use on backside clearouts:
Watching the flow of the tape (level 2) at critical trapping locations
When it comes to tape reading on rigged tickers (Level 2 / time and sales) it is not that much about watching the strong sized bids or offers hitting the tape on the rigged names (only mentioning this for rigged tickers, not just any asset in general), but rather watching the change in speed of tape instead.
The idea is that when rigger holds a strong portion of the float in his hands, he needs the liquidity to stack on the ladder to unload his position, which means unloading can be often only as fast, as fast are the bids restacking the ladder to the downside for him to flush (that if he is not willing to sell at loss).
This is why often on fake breakouts the rigger won't push the price into fake breakout and then instantly slam it back with unloading his full position into the first wash (for example flushing 3 mil shares on 6 mil float), because there won't be enough of such liquidity under FBO level, so he can unloading only as much as the bids are displaying at that moment.
This then leads to the fact that often the time and sales will not show any massive bids being hit or massive offers unloading there, but more or regular-sized shares, because the rigger only could afford to unload what the counter bids displayed (otherwise he would destroy the liquidity too much, crushing price against him and then being stuck with too much size still left to unload from higher price). It is about testing liquidity and repositioning liquidity, for which often time is needed. Especially when it comes to fake breakouts, anticipate them ahead and put your attention on tape 10 minutes before the key level breach and then at the breach moment, so that you have the context to compare the current flow/speed of the tape to previous minutes of action to estimate if the speed of tape did increase significantly but the price is unable to push, which is the A-grade variable for a stuffed-fake breakout. Make sure to write / note down clear fake breakouts on actual chart/ticker you are watching and then record / rewatch that tape action in hindsight to absorb that lesson. Its important to get concept right in hindsight first, before applying it on live market.
The above concept also very clearly aligns with the fact that a large portion of frontside fake breakouts can pull very fast, where rigger flushes his size instantly into quick high volume flush, while on backside fake breakouts or clearouts rigger will have to do it much slower, usually because the liquidity is much thinner on the backside after the stock has already cooled off, which means rigger will have to unload slower if he does not want to just crush the price of ticker (if still being stuck with plenty of shares long).
Keep this important info in mind to anticipate how quick should/could rug pulls or fake breakouts be, depending on the frontside/backside situations. Watch the speed of the tape and limit orders on the ladder to as well anticipate that. To illustrate the concept on image below:
For the reason explained above it is that much more important that the trader is tracking the flow of the tape (buying/selling waves and the aggression of speed of the tape) rather than critical very strong bids / offers that go through key fbo or stuffed price levels. Usually change in speed of tape will give hint a lot more often.
The flow of the tape: The speed at which the tape was trading per minute over X minutes (and avg size of shares) versus the current speed that the tape is trading over the past 10 seconds, is what determines the potential change in the flow. And to keep in mind, in many cases, it will not be very obvious, the differences might not be even 50%, it might only be 30% in a change of the flow significance. Perhaps the best way on how a trader should train at that is to cherry-pick many historical examples (video recordings or using TOS on-demand or similar software) and then checking heavily stuffed moves to observe how this looks on extreme-more obvious examples so that then the critical insight can be slowly scaled to other less-extreme examples in realtime.
EOD short squeeze or EOD dump
The key trade on rigged ticker should be to capitalize on the last rigger's move because that is usually where the key meat on the bone will be present. This means not spending too much mental capital or trade attempts in the midday trying to figure out every micro move of the rigger on the ticker, but instead having that big picture in mind, on what they might have on the agenda for the key move towards later hours, which means either a short squeeze into HOD clearout or to trap longs and rug pull, where the ticker will then tend to fade towards the market close in a strong selloff. Both of these scenarios are the complete opposite of each other, and to get a decent read on what their EOD agenda might be is something that takes a lot of practice, saving charts, and building a large database of rigged tickers to learn the themes, etc...
The premise of being focused on that EOD agenda move is because from the RR (risk to reward) side, the largest move across the entire day will be locked there, not always but with very high statistical significance, regardless if ticker dumps into the close after rigger pulls or if it short squeezes over 100 sample cases:
The green zone represents the mid-day area, which will be limited by the price distance (boxed) often, giving traders only limited RR, especially with wider stop losses. Also since the rigger needs to attract a decent amount of liquidity first before they can set a trap it is less likely that major move will come at the green zone of price area (structure and time relationship of development), instead, the key strongest move in either direction will likely be present later on, where the red rectangle is, allowing for RR expansion if the trader has caught the right side. It is often being patient towards later hours on rigged tickers for that reason. There are two ways to play this, either trader waits for initiation move (heavy rug pull, or strong push) in the last 90 minutes before the market close to joining the rigger then, or to join the trade ahead in expectation of direction before rigger makes critical initiation.
Waiting for confirmation will lower the RR but increase the probability of being on the right side while entering ahead will do the opposite for each of those variables. This is something that trader has to experiment with, there is no one-cookie-cutter-way to approach this.
If a trader tries to get too close to the rigged ticker, trying to figure out every micro move during the day it is really easy to burn whole mental capital. It is not rare that traders will often call such tickers "untradeable" because rigger intentionally makes those tickers very chaotic, with plenty of price spikes, very un-organic behavior which is all intentional to shake at micro levels everyone out as the minutes go by (revert to part of article above on weasels war dance). Trader must keep that big picture in mind on what their "last real move" might be (EOD squeeze or full dump) so that one is not shaken out on those micro moves trough midday as this allows the trader to develop more firm plan on where to join in, at which price levels and what to also anticipate from the rigger ahead.
To increase the probability of being on the right side it is critical to understand the component of backside in-the-money liquidity (including long and short liquidity). Usually, as the day progresses the rigger will keep shaking out one side of market participants, while leaving the other side of participants in the money, just so that at the EOD biggest move they go for that second side that was "saved" in the money the whole time, just to shake them with a strongest possible move into market close.
Keep eye on which side of participants are being micro-shaken through the day, because chances are that the move at EOD will be the opposite of that shaken liquidity.
For example, if they keep shaking out longs through the day with constant micro washes, but overall price structure/demand is still holding somewhat neutral, then chances are that the EOD key move will be the short squeeze, as that liquidity remains in the money trough entire day.
While if they keep shaking out short-sellers through an entire day on spike-selloff, spike-selloff, or continuous backside clearouts, then chances are that EOD key move will be heavy rug pull, leaving all the longs trapped on the asset (as longs were in the money most of the day).