by Brady Dahl
And this was mainly OTC…
It was all OTC. The strategy doesn’t work with Nasdaq stocks. It never did. I tried replicating it, but Nasdaq is too unpredictable. If the overall market is down, Nasdaq stocks are down, whereas OTC stocks don’t care at all. Every single OTC stock is a scam. Put that in the book! I became rich when I realized every OTC stock is a scam. You just needed to remember not to mess with the promoters. They have the big money. You want to ride with big money because big money never loses. Then you get the hell out before they start dumping.
Whatever happened to Stockgappers?
I don’t know. We had a falling out over something and I started my own chatroom. I eventually quit that too, because it became too successful. The competition threatened me and vandalizing my house.
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Competing chatrooms?
Yeah. I ended up going to the police over the matter and they basically laughed it off because it was a bunch of kids in chatrooms, etc. They didn’t understand, and I knew they weren’t going to help me, so I just quit. I was doing it for free anyway, so it wasn’t worth it.
What’s your routine on a typical trading day?
Well now I'm kind of retired and messing around too much, but I can tell you what I did all the years I was a well-oiled machine. I love penny stocks because I don't have to wake up early. Everyone starts with a fair advantage. The market opens at 9:30 a.m. EST, which is 6:30 a.m. here in California, so I'd wake up at 5:30 or 5:45 a.m. to be on my computer by 6 a.m. OTCs don't really move until about a half an hour before open, so I'd be looking at my gappers and scanners to see what’s moving. Before the open I’d have all my positions already keyed into Level II quotes and ready to click because there were so many positions to manage. When the market opens it’s a frenzy. I already know where I'm going to sell certain stocks and have live orders out. If 1 have eight positions, three might be main positions where I have bigger size and I’m going to hammer at the open.
“Hammer'' means I go in big size long or short at the open to push them. The other five positions I’m just aiming for $500 each, but they add up nicely. I might have 50K shares of one that goes up one penny, and I’m out! I don’t care if it goes up more because I was never planning to trade the stock anyway. Of course as my account grew I increased size. Eventually I was holding $50K, or even $100K to S200K overnight positions, but it was all done with proper risk management. Those five positions are simply bonus money.
You just take whatever the open gives you on those positions…
Yeah, out of five bonus stocks, two might lose and three might win.
But based on my strategy, they always averaged out in my favor. To do that I kept the position sizes similar in terms of dollars. I knew how much I could make and how much I could potentially lose. Depending
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on that, I changed position sizes so the wins and losses would average out. I didn’t want one position so heavy I couldn’t recover its loss with other positions. Within 15 minutes of the open, I could already be up $5K to $10K with 10 positions each profiting $500 to $1K.
What happens when those bonus plays gap against you?
I get the hell out right away. If a stock is up, I can hold it, but if it’s down, I’ll be the first guy out. It’s as simple as that, because I didn’t want to trade those stocks anyway.
So now that you’ve sold the bonus plays and the new day has started, what are you doing?
I’m hammering the shit the rest of the day. I don’t even take a pee break. I’m scalping my main positions. And just like the bonus profits, the scalps add up nicely. I would make 300 trades a day, net $50 to $1K a trip, whatever the trade would yield holding for as little as seconds or minutes at a time. It was basically manual labor. Manual high-frequency trading. I’d sit on the bid and offer all day, moving it around and scalping the spread. That was my specialty and what got me banned from market maker NITE. In essence, I was trading like a market maker, and I stole all their prints. They changed a lot of rules because of me.
Can you elaborate?
NITE was basically the main OTC market maker, so you have to use them. You have no choice. And they could see my I.D. when I placed hundreds of orders a day. They wanted to cut me off because I was stealing all their prints. But they needed a reason to cut me off, so they made one up. They said I canceled orders too often. Well if they don’t fill my orders, I have to cancel them, right? But suddenly they issued me a two-for-one mandate on cancels. For every two times I canceled an order, I had to fill at least one other order. Essentially they wanted to stop me from canceling so they could fill my orders. And usually when they want to fill you, you don’t want it.
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Because the price is about to head in the opposite direction…
Exactly. So what I did was choose a sub-penny stock trading at $.0001
per share and every time I needed to cancel a real trade, I would buy 1K shares of the sub-penny for $1. I did that so often I would end up with a million shares of a sub-penny buying 1K shares at a time. But canceling orders was the main reason they gave to shut down most of my accounts. They said I canceled too much and that I was manipulating the market by being on the bid and offer simultaneously.
But it’s fine if they do it…
Yeah, I don’t see why, but they make any laws they want. It’s a cat and mouse game. They would shut down my accounts, and then my brokers and I would figure out a way to mask my I.D. or put my account in a separate bank, any way to spread out the trades.
How did NITE get your brokers to shut you down?
They threatened the brokers that they’d yank the route for everybody, so they shut me down.
Wow, so how many accounts did you have to use to trade?
I think I have every account on the street. But I didn’t trade them all regularly. Technically you could use just one if you had to, but I use three primarily. Once you get big enough for the market maker to know your I.D., you have to spread the love around.
After hours, you’re done trading, right?
That’s the beauty of OTC. When the market closes, I’m done.
Do you review trades at the end of the day?
No. I don't need to. I was so good at reading a chart I could tell you what it was going to do 80 percent of the time. It’s all pattern
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recognition. It’s how high frequency trading works, except they’re programming the patterns in with statistics and data. It’s all pattern recognition and probability.
Seems like the algorithms know patterns so well these days they do just enough to manipulate stocks to make it difficult for us…
That’s why I can’t trade Nasdaq the way I traded the OTC, scalping on a micro short-term timeline. It’s hard. If I put in a stop, they hit it and reverse direction. If I don’t put in a stop, they run me over, (laughs) Do you come back at night to scan?
No. I’m a lazy guy. I scan one hour before the close.
When you pick your gappers…
Yes. I have a routine. During the middle of the day, outside of the first or last hour, I scalp. I choose the most liquid stock and I just hammer it. I think the most trades I ever made intraday was 600. And I’m talking about manually clicking to trade, not counting partial fills.
What tools or platforms do you use?
I’ve been using RealTick Pro for charting for 10 years. It’s like $300 a month, but my visualization of the charts is so tied to RealTick’s display that I must have it. If the scaling is off, I get confused. I don’t want to jeopardize my pattern recognition. I don’t use it to trade, though. My order entries are through my brokers.
The chart is most important to you because on the OTC market fundamentals don’t matter…
Yeah, I don’t even know the names of the companies we trade. I don’t know what they do. All I know is the ticker symbol. OTC is a scam, so the only reason a stock is up is because someone is pushing it up. And I let the chart tell me
what the stock is going to do the next day
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Do you use any technical indicators?
No, just price and volume. I guess RealTick draws trendlines in for me, but I mainly just eyeball it. I use 3-day, 5-day, 10-day, and 1-year charts to look back and see how low or high the stock has gone.
And intraday you’re using 1-min charts?
Yeah, I use all l־min charts during the day for scalps. And I’m a huge Level II guy for OTC trades. Level II is perfect on the OTC.
What are you looking to see on Level II?
The beauty of OTC trading is on Level II. On Nasdaq the Level II is all over the place, spiking up and down very quickly and sporadically.
But on the OTC the market makers are the ones who dictate where price goes, and they usually keep the movement very smooth and uniform. So if you learn that game, you can actually pinpoint where the stock is going to bounce or turn. That’s why I was the best at bouncing. I had the timing down. I could see when they flinched. I knew their pattern.
How would they show their hand when it was about to bounce?
It was a combination of me seeing them flinch and me buying so damn large that they had no choice but to go with me (laughs). I always knew that if I was wrong, I was dead, because I would basically buy that sucker until it bounced. If I was wrong, I would dump it immediately and take the big hit.
And weigh on the price even more…
Yeah. So you have to pick good entries. My entries were very good, they were very close, but I’d keep buying until the market makers said,
“Alright, I m joining this guy, and start buying, too. Then other people would start buying and the stock starts to go up.
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So you’re absorbing massive volume on the bottom. Are you sitting on the bid or hitting the offer?
I do both. Hmm. . should I reveal my trick on how to do it or not?
I vote yes.
Okay, what I do is once I see them flinch and I know I want to get in, I put in a bunch of bids. When I get filled enough shares, I slam the sucker on the offer. I slam it with so much size the market makers won’t fill any other orders out there. They are greedy as shit and now they see this giant order trying to buy. Once the price moves higher, I just leave the massive order there. Everyone else is now chasing over that price and now the market makers won’t fill them.
The market makers won’t give fills because they’ve already accumulated their own massive position at the bottom and also want the price to rise now…
Yeah. So I’m slamming the offer to make sure that sucker goes up. I don’t want to just sit and fill on the bid all day as it sinks lower. The key is to get what you want and then make that shit uptick yourself.
The moment it up ticked, everyone else is chasing it like an idiot.
And you’re already selling…
I’m already in twice as much as I want to be, so I’m dumping the bonus shares, the ones I don’t want, first. Those profits cushion me on the main position. That was my secret for big bounces. But it requires balls and great timing. You can’t just muscle it at the wrong price. A lot of traders try to muscle in the wrong places and get killed.
Because if they’re still dumping millions of shares, your flexing isn’t going to do any good…
Correct. So you have to wait. And when I was wrong, I would immediately dump the position and make it go lower. The point is to
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buy as low as possible, right? So in a way, if I was wrong, it was good.
I would slam back out with size and find out where the real bottom was, because when I filled, the bottom was in (laughs).
You’re still filling your sell for a loss and now you’re quickly trying to cancel it…
Yeah. Because when they’re finally filling my size it’s probably the bottom. Then I just buy back all the stock I just sold.
So where are you taking profits if a trade goes in your favor?
I’m recycling all the time. I’m the guy selling it all the way up and buying it all the way down. I’m basically the guy who controlled how the stock moved.
The unofficial market maker that NITE didn’t want to battle…
Correct. The moment I sell it, I’m already trying to buy it back. But if I get filled and it goes against me, I’m out. I’m recycling.
The entire position over and over?
If it’s too big, I’d probably recycle partials. But sometimes I didn’t have huge positions. Maybe 50K shares of a 25 cent stock that I’m just buying and selling over and over again. If you do that enough, the profits add up, and you don’t have the risk of carrying a huge position.
People have the impression that I’m always trading huge size, but often I’m just recycling the same shares a million times a day. My risk exposure is small compared to the total amount of shares traded at the end of the day.
So when you do take a big position, how do you treat it?
Believe it or not, the only big OTC positions I usually take ate overnight. Intraday I just scalp around the core position I held overnight. It’s the complete opposite of how I trade Nasdaq.
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What about with the massive pump and dumps we used to see?
Well, there’s two types of trades on the OTC: Promotional mailer/campaign type trades, and stocks just moving on news. With the big promotions back in the day, there used to be a trend. They would last for multiple days or even weeks. My secret back then was to buy the hell out of those on Day One of the push. And then don’t add. You’re a dumbass if you add outside of Day One.
You wouldn’t add those big pumps if they went against you?
If it goes against you, get the hell out. That’s how I would always have the lowest average. In fact I would overbuy on Day One. I knew it was going to go up, so I would sell the bonus shares early to cushion myself on the real position. If I wanted 50K shares, I might buy 75K, and then sell 25K early. Most people kept adding on the way up and that’s how everyone got burned.
There were quite a few plays back then where Day One ended up being liquidation day, though. The promoters would dump millions of shares into the buying and crushed the price. I remember because I got killed on a few of them…
Correct. And that’s when I lost my ass, too. But I was out immediately.
How do you use social media in your trading?
Personally I use it to educate people for fun. You see a lot of people using it to move stocks, but I don’t. I’m a very different trader. I have integrity. When I ran a chat room, I never did that. I posted my plays after the market had closed so that it wouldn’t influence people. I posted them as more of a teaching tool for people to go back and see the reasons why I bought or sold. A lot of gurus nowadays will find an illiquid stock, load the shit out of it, and then pump it to their 10K
sheep to push the price up. Is that real day trading? If they had no sheep, that stock would never move. So social media can be good if you use it like a free scanner to get trade ideas, see what people are
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playing, but it can be bad if you don’t know what you’re doing and get burned by the scammers. I think the SEC should crack down on it.
And how do you use chat rooms?
I use chat rooms for the same reason—to see what’s moving. Once I see the ticker suggested, I pull up the chart and do my own research.
It’s like a scanner. New traders should be careful about reading and believing the content. Only use it to see what s in play. By the time you’re reading about a trade posted by someone else, they re already in.
They’re pumping and you’re chasing, doing them a favor. What I do is pull up the chart and wait for a better entry.
What’s your most reliable trade setup?
For the OTC market I talk about the 3-day rule for longs. Actually you might start on Day Zero, when a stock that has no volume at all sort of pops up out of nowhere. It’s not being talked about yet on
social media, but you can see someone accumulating shares and pushing it up quietly. You can buy a little bit that day. The problem with buying on Day Zero is that you can be wrong, it could be nothing, and then you’re stuck. So a safer way to play is wait for Day One, where you see a classic breakout on huge volume following a flatline chart. Then you ride it until Day Three, reducing your position each day. That’s what I did for OTC, but I think it works to an extent with Nasdaq, too. I would be heavy on Day Zero and Day One, then light on Day Two, and even lighter on Day Three. Then if I can short it Day Three, I short it.
So you’re already looking to short on Day Three?
Yeah or whenever the trend changes. That’s ideal. OTC was far more reliable. For Nasdaq you definitely want to wait for the back end of the trade. Avoid shorting it when it’s going up. Better to be late than early. And the best thing to do with Nasdaq is avoid the big boys, avoid the stocks that all the analysts cover. You don’t want to be short when J.P. Morgan comes out defending the stock. Stick to small caps
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that you know are scams, where you know the huge overextended move up isn’t justified. It’s ran for three days and now the first signs of weakness are showing. There are little, if any, analysts covering small caps. It’s just a bunch of pumpers and dumpers like the OTC.
What’s been your most profitable setup?
Definitely the gapper play. Gapper was my bread and butter every day.
You could make $3K to $5K depending on position size, but a good day would make me $7K by 10 a.m. Then the rest of the day was just hard work. But the gappers enabled me to know which stocks were strong and which were not. Plus it’s very difficult to want to initiate a buy when a stock has already gapped up, but if you’re already long from the night before, it’s easier. If it’s strong, I might not even sell it.
I’ll probably add to that opening spike, trying to rip the shit out of the shorts and force them to cover into the squeeze. The downside risk was so limited, and these gains added up so quickly. $5K a day makes $1 million a year. Slow and steady wins the race.
So when you start the hard work of scalping intraday, it’s likely a position you’ve held over from the previous day?
