In today's episode I Want to show you how to capitalize on Fomo in the market without falling victim to it yourself as active Traders We love volatility and we have seen a lot of it this year. in a couple of different sectors. We've had our tried andrue biotech stocks, these clinical trial stage companies that have news that comes out and the stock goes up a th% in a day or a couple of days. Those are awesome.

And then we see special acquisition companies. these stocks that they merge with another company bringing that other company into the public space and the stock gets a pretty big squeeze. Truth Social is doing one of these. This was a big one about a year ago or was it two years ago now? I think it was two years ago.

Uh, Dwac merging with True Social. the Trump Social Media Network right? So that was the special acquisition company got super super inflated. People were so excited about it. Well right now, one of the things that we're seeing a lot of are Chinese IPOs So these small Chinese companies are IPO o But what we keep noticing is that they're doing some really crazy things.

We're seeing huge moves. and I think because we're seeing these big moves, it's almost. Um, it's almost like perpetuating that they're going to happen even more often because now people are expecting them. They're kind of changing their risk profile about how they trade them to accommodate it, and it's making it more likely that these things keep happening.

So let me show you on the Whiteboard what we keep seeing happen with these: Chinese IPOs is the company IPOs A lot of times they make a move, like right away. sometimes they sell off for a little bit, sometimes they even go red versus the IPO price. but they kind of keep going up and up and up and up and up until one day when they go like this. And it is insane on these days.

Right here when they make that drop I mean it is unprecedented. That is a drop that it's scary to watch now. Short sellers love them all right? These are huge flushes. Unfortunately, a lot of these are hard to trade well because because they're very thinly traded, they have big spreads and we've seen some that have done a move a little bit like this.

Let me let me flip this whiteboard. So uh, we've seen some that have done something kind of like this. They IPO they go up, they go up, and then they drop, but then they immediately recover and go way way higher before the next drop. So be careful if you're the trader shorting in here thinking this thing is going to go all the way back down because they have shown a tendency to squeeze out those early short Sellers and I Think what this ultimately does is it creates a lot of liquidity that allows insiders to sell shares because these IPOs a lot of them I mean you know an IPO In general, the general concept of an IPO is sort of one of two things.

Either it's an opportunity for the people who own the company to cash out by selling their stock, or it's an opportunity for the company to raise money that then goes into the growth of the company in a major way. Now both can happen at the same time. But the Insiders selling. The thing with that is that most of the Insiders who have stock in company, they own it at like pennies pennies a share.

I mean they own it at such a low cost basis that selling it at for anything on the publicly trade markets is a huge profit. and I think that's what we're seeing now with a lot of IPOs You do have a lockup period where you can't sell if you're an inside, even if you want to. so you've got the lockout period. That's not true with all IPOs but it is true with a lot of them.

But then after that period ends well, you're free to sell. And if you want to dump a million shares on the market all at once, you could do it. It's going to hurt the stock price. It's going to hurt it pretty badly, especially if it's a thinly traded stock.

And so what I've noticed is that Traders have been getting really focused on trading these Chinese IPOs Because to the upside, they do seem to have a lot of potential when they're still going strong. I mean it's like you've got this, you know, tailwind and they just keep going higher and higher and higher. but then when they reverse, you know it's it's the opposite. But short sellers love it.

So there's kind of opportunity for both Longs and shorts. but I don't trade to the short side. which you probably know now. There's a couple good reasons for that, one of them being I trade in a retirement account which means I cannot short stocks.

That's a rule. you cannot short stocks in retirement account. You could buy puts and trade options against a stock, but you can not short it. So if I did trade to the short side, I would pay income tax on those profits.

if I trade to the long side I have no income tax. So for me, I'm much more inclined to focus on just trading the long side because otherwise I'm giving up too much of my profit in tax and that's because of my income bracket as well. That's not the same for everybody. Okay, so now, and one of course, a couple of the other reasons: I Don't sure.

Number two: The cost to borrow. The cost to borrow these stocks can be substantial. Number three: If you get caught in a halt like a T12 halt, you have to pay borrowing fees every single day that you're still holding the stock. And number four, when these stocks start to squeeze, they can wreck short sellers so fast it's not even funny.

Case in point today, let's jump on the screen. Share: So uh, so I'm going to show you the stock today that went up a th% before I Do though, let me show you this uh example of a recent um Chinese IPO a recent Chinese stock. This stock dropped from uh $14 a share all the way down to A170 in one day that was last week. Uh, this is the daily chart of the stock.

Okay, so you can see the IPO back here. It sort of sells off, comes back up high volume on this day, comes back up on this day, drops down, and then all of a sudden here we go. It just starts ramping up higher and higher and higher. And then here it just drops.

and I mean that is an incredible drop. How about W Bui We buy, um, more like we sell. So this one, uh, similar drops on the IPO comes up, goes to 14 and then in one day drops all the way to. You know I mean this is now 65 cents a share? How about MSS MSS All right.

so this one, um again. IPO recent IPO goes up and look, you can see there's clearly opportunity on both sides. These are some big green days. This is volatility as active.

Traders We like volatility, but when you get those drops, it is pretty scary. Okay, so today we had z z ZJ yl ZJ yl Now this stock. Um, we got to look at the F minute chart on it first. So you're going to notice that has a high a day of $500 but but pretend you didn't see that for for just a second.

Okay, so first let's actually look at the daily. Okay, this is a somewhat recent IPO ipoed back in March and or yeah, end of March something like that. Uh, anyway, so Chinese IPO goes up a little bit. you know, gets some attention in September When a lot of these were hot, sells off, sells off has been kind of grinding higher.

And then today today it seemed like was the day that the big drop was happening. All right. So all of a sudden today, uh, look at this drop. it's hard to see the chart because it's got so screwed up.

So I think this is one of those ones that Shorts looked at and said here we go, start adding and don't stop because this is going to be the next one that goes to two bucks. See, this is the problem with getting overconfident. A pattern works and works and works and works until it doesn't And here's something that I'll say that I've noticed with pretty much every short seller that I've ever known. their accounts look like this.

Pretty solid right? until they catch that one that does this and then they have to start rebuilding. And they rebuild. They rebuild, They rebuild until it happens again. Like this, it's sort of inevitable when your strategy is to keep shorting everything that goes up because everything that goes up.

Here's the thing. and I'm not trying to criticize a strategy because it does work and there's people that make money on it. But that's what their Equity curves usually look like when you when something is going up and you're shorting, shorting, shorting, shorting, and then it. and then it pulls back for a second, Then it goes higher and you're adding, adding, adding, and then finally up Here You know it rolls over and pulls back your ability to keep adding higher and higher.

You're still able to cover it for a profit. All right. So this works essentially until it doesn't until you have that stock that just goes up. It pulls back for a second, it goes higher, pulls back for a second, goes higher, pulls back for a second, goes higher, and next thing you know, it's gone from $25 a share to $500 So now if you were short, let's just say for for the sake of argument, you shorted and let's pull the chart back up.

So let's say someone was looking at this one this morning. This is a cautionary tale someone's looking at this morning and was like oh, here we go, We just halted down. so as soon as it resumes trading, they add let's say a th 2,000 shares short at 20 bucks $22 All right, it drops down here. they add another 2,000 shares.

they're thinking this is going to be the next one just like chsn just like we bu just like so many of the others and then add a little bit more here. So let's say now they've got five ,000 shares at uh $17 a share? All right, drops down to 12. It it okay so it halts up. All right, that happens.

that happens. It's probably going to Halt up a little bit and then drop back down. Uh okay. whoa.

It just gapped up to $25 a share. I Sure was thinking this was going to go down to like 250. So now this isn't looking good. I'm probably going to have to cover on resumption because I'm in with 5,000 shares at 1750 now I'm down.

Gosh man, almost I mean 5,000 shares if you're really in 5,000 shares. In this example, at 1750 when it hits 2750, you're down 50. Grand 2750 is 50 Grand What happens if it all of a sudden resumes and I'm not kidding, it resumes at $598 a share. you're down millions of dollars.

Millions of dollars. And that's how fast a short seller's account can be gone. That is not just that is that's fatal this type of drop. This type of um loss would I mean that would that would wipe.

That would wipe a lot of people out. Now can you afford to hold and and add? Well if you could, you know, Maybe All right it's still holding at $180 So the level two on this right now. Oops. The level two on this right now is, Um, $161 by $1 17750 Right here.

you've got a massive spread and even if you wanted to sell and unload 5,000 shares that you're short by covering, you're going to get some slippage when you try to cover because this is not liquid. So how does a stock go up that much? H Honestly, how is it even possible that it halts up at 25 and resumes that high? When it halted up, it was initially showing $700 a share. it was showing 700. The resumption price came down to 500, but it still opened at $500 That's truly that's scary.

I Mean, if you're a short seller, that's really scary now. This could have gotten halted anytime on a T12 pending more investigation by. The Exchange I In a way, I'm surprised it didn't Uh, you know. But and you could ask, H how does something like that happened? So the mechanics of how that actually happen is an imbalance was created and that resulted in the price being that much higher.

And that's pretty crazy to think about because the amount of volume on that on that candle on resumption was only 60,000 shares. 60,000 shares. Now that's a lot of money. It's still millions of dollars, but 60,000 shares was enough to create an imbalance where this went from $25 all the way up to $500 a share.

So you know the problem here is that. and this kind of gets back to what we were talking about last week about special acquisition companies. So we've noticed that certain Market participants market makers institutions. They're Very.

They're very good at kind of gaming the system and even, uh, Jim Kramer Talked about this in an interview on the street when he was running running his hedge fund about. you know the things that they would do when he was. You know, when he was actively trading to bid up stocks to push him back down. I Mean it's it's kind of wild what some of the big money players are capable of doing.

And so in the case of this stock, What? I suspect is that somebody out there pressed the buy button for a huge order. I Mean it's it's really. it's almost Unthinkable how big that order would have had to have been in order to push the stock that much higher in terms of millions of dollars? But someone did it and it forced this crazy resumption? Now, could it have been? Could it have been a a handful of short sellers who thought this thing was going to drop? And then all of a sudden you're seeing these huge resumption prices they have to cover. They have to buy.

It could have been it could have been a clearing firm that forced forced some some short sellers out of a position. This happened in the case of BPTH Um, several years ago where a hedge fund Trader took an 800,000 share short position. So every every dollar a share the stock went up. He was down 800 Grand and the stock went to like $42 a share on a on a short squeeze.

And so the clearing firm for that U Market maker or sorry for that hedge fund actually came in and was like we have to start selling your POS covering your position because you're now at a margin call and so when they're doing that, they're just pressing the buy button. You know it's like they're just cutting the loss. They're not looking at the technicals of the chart and being like oh, maybe we could hold this a little longer. Risk Management: They've got to cut it.

They've got to let it go and they're not emotional about it. I mean these guys, they have so much money, they're just like, nah, cover it, get it, Get out of it. It's a $20 million loss. Whatever.

But for real I mean these are multi-million dollar losses and I Think that this highlights the risk certainly of Short Selling Now there's also risk in going long. There's there's risk in trading. We can't deny that it's it's it's risky. this career that we've chosen this game of trying to trade against the markets.

We're trading against some really big players out there and we're trading against the algorithms. You know everything else so it's not easy. But the way I look at it is these are all opportunities. and I have to do risk analysis and ask myself, is this an opportunity that the profit outweighs the risk And in this case the answer was no I didn't take any trades on it I said it's got T12 risk I'm obviously not going to buy it up this High I'm not going to short it either.

so I'm just not touching it I'm not interested in it, but this just highlights the theme that we've seen in a lot of these. um Chinese IPOs this year. So one thing that I was a little bit curious about. um I was curious about some of the underwriters for these.

Um, these IPOs the underwriter is the firm that helps Bring the actual company into the market. So um, so for ZJ yl I was like oh so let me look up the underwriter here. So Prime Number Capital is the underwriter for this. um for this stock and so I was like, oh so let me let me look at some other IPOs that they've done.

Are any of them familiar mhua I'm familiar with that one I remember that one from earlier in the year so we can. Um, mhua we can look at the daily chart on this. I'll just close out these charts just for now. We could just look at the daily so daily chart on Mhu.

we could back this out. Oh yeah. Yep. Okay, yep, that's right.

That's why I remember it. yeah. I remember it because it made a huge move and I traded on the upside and I made good money on it and I'm happy to trade these. but I also don't want to forget what I'm trading I'm trading a very volatile asset that will probably not hold its value very well over time.

So they they were the underwriter for M M. Um, Mhua. Let's see. ZJ Yl, right? we got that.

Um, this one. Atgl, Atgl. That's another one. So you're going to start to see some familiar names on these lists.

Atgl. this is another big one. Now the fact is, they're they're underwriting small cap stocks. So small cap stocks are going to be the most volatile Anyways, some of them are going to hold up well, some of them will not.

So I'm not looking at every single. I'm just looking at these ones I'm familiar with OMH I'm familiar with that one so Om was another one that was pretty volatile earlier in the year. The ones that have lower floats are going to tend to be the ones that are more volatile they have Li mited supply and demand. They can make these really crazy moves I mean look at this.

I'm not kidding. This is a stock that you know, so this is a good example. This one squeezed up up to from about uh $6 to $35 in one day. It then dropped all the way down to 10 and then it squeezed out those early short Sellers and it ripped all the way up to $60 a share before reversing the whole thing two days later.

That is a roller coaster, but no doubt some opportunity. All right. So that was that one. Then we also had let's see.

Um there was um Maxim group so this one. um, Wiissa WIA tops Inpx Ship Sin NT Gmbl Bol These are a lot of familiar names: Ctrm, Ttnp, Apdn, and some of these Bioc. Some of these are pretty. You know these are companies that have held up um, but not all of them obviously.

So some volatile stocks on this list for maximum. uh, what was the one I think um, was it at I can't remember? Um, let me just check at AK All right. So let me just check this. Um, let's see if I can find the underwriter in here.

Um, oops, uh Maxim group yeah Maxum group the sponsor. So right there. Yeah, so that's Maxum group and then uh, let's see Univest these ones have some other um, you know so you kind of get to know boost dead Capital is I think it's Boost dead um boosted Securities maybe boosted these ones Um, these had some uh, this company had some IPOs in the last year that were pretty wild. um I'm trying to remember all of them well.

so what we could do? So so we're going to look at. uh, we're going to look up Boost Dead Securities All right. So I'm just going to copy that here for a second. All right.

So boosted Securities Oops typo LLC All right. So um, shph Flg Flgc Hpco that was one asst mgx um Gmbl that was one last year Vrx EET I Remember that one Uh, so you know you start to look at this, you're like oh yeah, these are some of these are familiar stocks. The fact is, a lot of the big Banks you know JP Morgan And this and that, a lot of those big banks are not going to be super inclined to, uh to even do underwriting for small cap stocks. This is actually something that was kind of interesting.

Um, it's a little bit of a tangent, but in, let's see, it was. um, after the financial crisis, there was, um, concern that there weren't enough small caps that were iping on the market and that to encourage may. Maybe it was because of decimalization. So for those of you who have been um in the markets for a long time, you know that in 2001 I think it was February 27th um 2001 the market underwent decimalization.

So prior to that, stocks traded. um you know two, two, two and a quarter by um two and you know I guess two quarters or two and a half right? So you had these fractional spreads. So stocks were trading in fractions and this was no one else in the world was doing the system. So February 27th they said let's move to to decimals so it'll be 2011 by 202.

but um I remember when I bought my um Mercedes G Wagon uh the the the salesman asked me what I did for a living I said I was a Trader and he said oh yeah yeah I used to be a Trader and I was like oh what happened he's like decimalization is what happened. So he was one of these um market makers that made money on the spread. So when you have a you know when you have a stock that's trading in in these fractions where of a quarter you're making 25 cents on the spread. So $2 by 225 right now we did trade down in E so you could trade even even less.

The smallest spread was six and I think six and a quarter Penny 6.25 Um so what is that a a 16th? But but in any case, um so you you could get really tight spreads on some, but even the tightest spread still gave you 6 and A4 cents. Which meant buying 10,000 shares across spread would yield you $625 profit after decimalization, 10,000 cents, 10,000 shares across a 2011 by 202 spread yields only a 100 bucks. So one six of the profit and just like that, a huge sector of um, the market was wiped out and so in The 2010s Regulators thought maybe um, the reason we're not seeing more small caps being brought into the market by the big Banks is because they're not making enough money on them because the spreads are too tight. So let's try testing 5cent tip a 5-cent tick pilot program and during that period which lasted two years, stocks of certain price ranges about 700 of them were always trading with a 5cent tick and it wasn't like 202.

By 207, it was $205 10, 15, 20, 25, 30. And so it was kind of wild because you went from a stock that would have 100 increments from $2 to $3 to only 20 increments and so all of the orders would then um, you know, would fill into these kind of tranches at at every five cents and so it was very stacked and it was very hard to trade those stocks. They really weren't very liquid and they weren't very volatile and in in fact, it did not result in more IPOs coming onto the market. So that was a failed experiment.

The T The 5-cent Tick pilot program ended and I don't A couple years few years ago, uh, before Covid happened and so now we still have this issue where a lot of these big banks are not interested in IPO in a small company. So you know, let's say I want to IPO Warrior Trading wants to go public? We're not going to go to JP Morgan or you know, Goldman Sachs They wouldn't even care, they want to be IPO You know Airbnbs and you know, because let's just think about it. for real. like a small company that has a 5 million share float and their iping at $5 a share, it's 25 million bucks.

That's that's less than these big Banks make in a in an hour while they're sleeping. It's nothing. It's not worth it for them. why even bother? So they don't And that ends up resulting in this kind of Boutique market for um, for these sort of small cap companies.

So a lot of these, um, a lot of these different, um Underwriters boost dead and um, let's see what was it. Maxim group and Univest and prime number Capital so you know these are these are smaller. These are smaller companies and they serve a niche. A niche that has, um, you know, been created by the fact that the big uh, the big Banks don't seem to want to have any part in bring small cap companies into the market.

So and then there's of course, um, within this industry there are companies that specialize. So The Specialist of bringing Chinese companies onto the US Market to be publicly traded and I suppose in a way it makes sense because the US is such a big Market it's a great place. there's a there's a lot of investors. there's a lot of people that are very interested.

The US is where people will come to invest in companies that are foreign and so Chinese companies can come and we've had you know Alibaba you know they're they're big Chinese companies that will come and become publicly trade on the US market and that's a choice they make because it gives them more exposure but sometimes s it also feels like retail Traders um are just like being raped over the coals and the people who are really making the money at the end of the day are the people who own stock. I mean and the these are the the people who like own the stock before the company. IPOs and that's not me, it's not you 999 per of you, it's not you. so we don't really have.

we're not big money, we're not Deep Pockets We're not all. we are the baby fish and we get to ride the little waves in the market. and some of these waves are pretty big and you have to be careful. You want to capitalize on the opportunity, but you don't want to lose your shirt.

You don't want to be the person that buys the stock at $300 a share and then two days later it's back at 50, right? So you have to control yourself and and even as a short seller, you don't want to be the person who shorts a stock like this and ends up having to cover at $500 a share. So in a sense I limit my trading to Windows of the day where I have the highest accuracy, where I have the most consistency. where I can confidently say that I've got a really good chance of making money and later in the day when things get a little wild. I mean the Market's wild enough already.

but later in the day when things get like this I say you know what I'm not going to push my luck I'm going to be grateful for what I have. And so today for me was a relatively small green day and I'm happy for that. I don't have to push it, but you know I'll be back at it. Uh, first thing tomorrow morning and is it going to be another? Chinese IP Are we going to recent IPO Are we going to see some more M momentum on these? It's possible.

Uh with the Spaxs you know one of the things that we've seen is symbol changes. When when these companies change their symbol, this is like it creates like a glitch in the system. I this like Y2K stuff. but when when companies change their Qip number or when they change their ticker and I think they usually do both the same time.

Um, all of a sudden the the algorithms that are making the market for that stock they're like and you see this with Market Data vendors Market Data vendors are like they're so bad with symbol changes because there's not really clear enough. Communication in Far Enough advance that the market. Um, data vendors can be prepaired I See this sometimes on the scanners. All of a sudden a company changed its its stock ticker overnight and it yeah, if it happens on Apple or Facebook to Meta, that's big.

There's lots of time. but when it happens on these small cap compan compes and all of a sudden, you don't know about it. Now the next day there's a new ticker trading, but there's no market makers providing the market. Now you have one Trader with deep enough pockets.

they could start pressing that buy button and it can go from 10 to 20 to 40 to 60 to 100 to 200 to 500 to a th000 to 10,000 I Mean it, it's these can. actually these things can happen and yes, a lot of times they'll end up getting halted by The Exchange The Regulators will be like what's going on here, but you know we see these things happen. As I said in one of my last episodes, you know, as an active Trader there's a little bit of a bell curve of what we're willing to trade and the stuff over here like what we just saw in these. some of these: Chinese IPOs the stocks that go up like absolutely insane.

These are on the too hot and too risky for me to touch I just kind of leave them alone and then too cold over here. too cold. These are going to be the stocks that, well, they just don't move at all. so you know I'm I'm a little bit of a Goldy here, but I like my stocks to be just right.

just perfect right in the middle and you know if if I start seeing that my risk profile is working against me, that's when I kind of back out and I get out of the way. I've been doing this for over a decade fulltime. I've been doing this for really a long time. I Took my first trades when I was a teenager which is crazy and I've been able to keep myself consistently growing my account simply by following a set of rules I Follow them in my trading I encourage all of our members to follow them in their trading, you know? I I Just think if you don't have a set of rules, you don't have a strategy you're going to follow.

You're going to fall victim to Fomo. You're going to end up capitulating, giving in to your impulses. You're going to end up in one of these stocks which have a lot of potential, but only if you know the right places to trade them. And when you cross that line, you get yourself into big trouble and you know it's easy for people to say.

Oh, Ross this is small cap stuff. I'll just trade large caps I'll just trade large caps and I'll be I'll be just fine. Well, you know, let's take a let's take just a moment to look at some large cap stocks from the last couple years. Here's DocuSign DocuSign is down, uh, substantially.

Zoom How much is zoom down? Zoom is down substantially. There are a lot of really large cap companies that got just, uh, they got. You know, they went crazy during Covid and people who held and held and held are down a tremendous amount. so it doesn't matter what sector you trade in, you have to have a set of rules that you follow for your trading.

and you have to have the discipline to follow your rules. So for those of you that want, um, some tips on gaining discipline, I would encourage you to check out this book. I Heard it's a bestseller on Amazon I Heard the guy who wrote it is smart as can be and handsome. He's got a beard that you could stare at for years.

so I Hope you guys check this out. I Think you'll enjoy it if you haven't checked it out already. I'll put a link down in the description. um, but in this book I Outlined my 20 guard rails that I follow in my trading and oh, there's a picture of me around the time I took my first trade.

Uh, let's see where was it there it is that was around when I took my first trade. Just a little fella. That's right, future day trader. So anyways, check out the book I Hope you guys enjoyed this episode.

Yes, the markets are wild. They always have been. they probably always will be. Uh, so buckle up! The roller coaster is open and it'll be open first thing tomorrow morning.

and I'll be here to take a ride. so I'll see you guys back at it first thing tomorrow morning. Reminder is always: trading is risky. My results aren't typical and there is no guarantee you'll find success whether you trade with me or you trade on your own.

So please manage your risk and practicing a simulator before you put real money on the line. And don't try to blindly follow me or anyone else. Trade alerts are flawed. Learn the strategy, take your time, the market will be here.

I'll see you first tomorrow morning.