Say a chatroom guru with about 100-200 members puts out a alert to buy a low float stock, would this have much of an impact on the stock? Does volume of the stock matter?
Most of the stock they trade have 200,000 to 500,000 shares tops. If it is a $0.50 stock, you could control a good chunk of it with $50,000 capital. Guru buys the stock, tells his followers it is going to the moon, they buy the shares and drive it higher. He dumps the shares at the top and cleans up, his followers fight for the scraps left. Smarter ones would get out real quick, the rest would find there are no buyers as the stocks goes lower and lower. Guru could also, have shorted the stock on the way back down. So, the guru gets rich off his horde of students from the pump and dump stocks plus the fat tuition he charges his students. A pretty nice gig for the guru and his buddies assisting him, not so much for his hordes of students.
Front running subs on thinly traded stocks < $3 on both the entry & exits is a highly lucrative scam. You pay them for the privilege of being their victims. No professional trader with any sense of ethics/decency would have novices trading low float/no-name stocks. Stick with the most liquid & actively trade stocks of companies that are household names.
Great point -- front running cheap under-$10 low float thinly traded stocks is an old scam being done by mostly young crop of wannabe daytrading guru conmen. Traders don't realize the deviousness of the scam... the room operator looks like a hero because when he picks one it usually will run a bit.... but only because he intentionally finds low volume stocks that will artificially run up since he tells hundreds of people itll go up.... due to them buying, artificially moving price.... he sells into the buying he created, his poor traders become bagholders. Old con The con simply won't work with liquid high volume stocks, because his followers can't trade enough volume to push price up. That's your protection, traders, only trade higher volume stocks with volatility. Unfortunately they are popular because they are active on YouTube and Instagram, claiming to make thousands daily, and unsuspecting traders drink the low float momentum koolaid, losing lots of money. Like I've told traders for years, and published in my S&C articles... NEVER trade stocks with less than 15k/minute volume, and focus on stocks and ETFs in the $15 - $60/share range primarily. Like AMD TWTR MU SQQQ JDST etc. Or occasional under-$10 stocks only if the volume is at least 15k/minute.... I believe that is sufficient to prevent frontrunning.
I'm not saying it's a bad advise, but if one can find an edge with low float stocks, why not? Low floats have less hft and institutional participation so respond well to TA. Just be on the right side of manipulations
I see your point, though it's like hot potato, who gets out before becoming the bagholder at top..... it's overall a dishonest, misleading approach to chatroom training, because traders are in a phony, manipulated environment that doesn't teach them how to really trade. Those operators can also be spotted, outed because they use paid-off shills who act as cheerleaders, and post attaboy and fake bs like "just sold POS at $3.88 up $2,500 thanks guru". The bs operators never use gotowebinar, like I use, because attendees comments aren't seen. The shtshow they run depends on social proof shill comments seen by their victim traders, to sell the fake dream. Just like the "free live trading seminar" model used by bogus trading education companies, who used shills who were planted in the audience playing roles like "skeptic turned buyer" to induce victims to buy. Thankfully the sec usually takes em down, eventually. "If it sounds too good to be true...."
I actually agree with you that we retails could do better fishing where the fish is a minnow for the pro boys. The risk is very high so you have to do your homework, know your target to make sure it is not a pump and dump. TNDM is one examples the pro boys missed. One ET member mentioned this stock about two years ago.
I don't entirely disagree. However, it's still trading and many of required skills are common and transferable to other styles of trading. I see prop firms trading low floats as well. So I guess people need to decide for themselves. One thing is for certain, if you have a small account, your choices are limited to low floats or options - if you are trading for income that is.