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These 5 Market Maker Signals Can Move Markets

Jenna Gleespen - August 17, 2021

Market Maker Signals

If you’re trading penny stocks, you’ve likely heard about Market Makers signals.

They’re a hot topic with stock traders, no matter the price of the stock.

Many people believe that Market Makers communicate through a series of signals.

These signals indicate what they’re looking to accomplish through the purchase of shares.

This may seem a little confusing, but we are here to offer some needed clarity.

In this guide, we’ll explain the 5 most common signals used by Market Makers and what they mean.

So, keep reading to learn everything you need to know about Market Maker signals and how investors use them to trade stocks.

Market Maker Signals

What Are Market Makers?

Market Makers are individuals or a firm that actively quotes two-sided markets in a security.

They provide bids and offers, also known as asks, as well as the market size for each.

Market Maker quotes look something like this: $5.00–$5.05, 100 x 500.

When you see a quote like this from a Market Maker, it translates to what they’re willing to buy and sell stocks at.

They are looking to bid (or buy) 100 shares at $5.00.

They are also looking to offer (or sell) 500 shares at $5.05.

Other investors can buy from the Market Maker at $5.05, which is known as lifting the offer.

If participants sell to the Market Maker for $5.00 a share, it’s known as hitting the bid.

Depending on the way a Market Maker buys or sells can turn the tide of the market.

It is also a way to forecast your own trading if you know what to look for.

So, understanding Market Maker signals is an excellent way to make money on the market, especially with penny stocks.

Following along with their signals is a good trick to keep in your back pocket.

5 Common Market Maker Signals and Their Meanings

If you’re looking at Market Makers as a way to influence your own trading of shares of a stock, it’s important to know what to look for.

These are the 5 most common Market Maker signals, and what they’re supposed to mean.

1. 100 – I Need Shares

If a Market Maker is looking to obtain 100 shares at a time, it means that they’re trying to purchase them at a lower price.

Market Makers will never put up a bid for thousands of shares at any given time because it will likely result in them losing money.

If they purchase shares slowly, or incrementally, they can save some money in the long run; this is why they usually buy in small amounts.

Market Maker Signals
100 shares. Old stock share certificate. Vintage scripophily objects.

2. 200 – I Need Shares Badly

If Market Makers bid for 200 shares at a time, it means that they need shares badly, but they don’t want to take the stock down.

This is another way of ensuring that their bids are going to be cost-effective in the long run. 

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It also shows that they want the shares more than they do when they bid for 100.

3. 300 – Take the Stock Down So I Can Load Shares

A bid of 300 means that they want the stock taken down or that they plan on taking down the stock by at least 30% so they can load shares.

This is a way of getting the stock price to come down so that they can purchase more.

Market Maker Signals

4. 400 – Keep Trading it Sideways

This is how Market Makers stabilize a stock price before making it trend higher or lower in price.

Market Makers need the right amount of support and resistance to pull this off correctly.

By posting a bid of 400, a Market Maker tells the other Market Makers to keep things stable for the time being.

5. 500 – Gap the Stock

Gapping the stock is when the stock in question opens higher or lower than it closed the previous day, with no trading activity in between.

The gap can be up or down, depending on the direction of the Market Maker’s 500 signal.

Market Maker Signals

Less Frequently Used Market Maker Signals

The above Market Maker signals are the most common that traders should be paying attention to, especially when it comes to penny stocks.

However, there are more that have been identified over time.

We have the most reliable ones listed below so you can understand how Market Makers communicate.

  • 505 – I Am Short on Shares
  • 600 – Apply Resistance at the Ask to Keep the Price from Increasing
  • 700 – Move the Price Up
  • 777 – Move the Price Up
  • 800- Prepare for an Increase in Trading Volume
  • 900 – Allow the Stock to Float and Trade Freely
  • 911 – Pending News, Planned News Release Coming Up
  • 1000 – Don’t Let it Run
  • 2000 – Let it Run

 

Are Market Maker Signals Legit?

This form of communication is a hot topic among stock traders.

However, there’s no physical proof that these signals are real.

Why’s that? 

Well, if they were able to be proven, they’d be illegal.

If Market Makers were to use other forms of communication, like emails or phone calls, they’d be arrested for collusion.

Outright manipulation of the market is not allowed.

Many Traders Believe That Market Maker Signals Are Proven

While there aren’t physical documents or digital messages between Market Makers, this isn’t to say that these signals aren’t a form of communication.

Countless dedicated penny stock traders have watched these small buys and connected the dots.

In fact, penny stocks are where many people picked up on these signals to begin with.

Small buys are a huge part of penny stocks, and sometimes the signals are the easiest to see there.

Market Makers know that these stocks won’t allow many investors to purchase them at the low volumes they ask for because the cost to trade them would outweigh the cost of the stock itself.

Additionally, many people who have worked the markets and worked closely with Market Makers will swear up and down that they’ve seen the signals themselves.

There are many accounts of former professionals turned independent traders who have caught Market Makers making false bids just to send their signals.

Surely these successful individuals can’t be wrong, can they?

Market Maker Signals: Final Thoughts

Market Maker signals are a hot point of contention when you’re talking about the financial markets.

Some people don’t put any stock into them whatsoever, while others swear by them wholeheartedly.

The fact is that Market Makers aren’t allowed to manipulate the stock market — in any observable or measurable way at least.

Therefore, we don’t (and never will) have any physical evidence that Market Maker signals are real or not.

However, many traders believe that Market Maker signals are accurate and point to success — especially in the case of penny stock traders.

They’ve watched the markets, and they’ll swear that these signals exist.

We’ve given enough examples of the signals and what they mean; at this point, it’s for you to decide.

Are Market Maker signals real? 

We certainly think so.

 

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Jenna Gleespen is a copywriter specializing in finance and investment finance. Originally from the United States, she now calls London, England home.