Understanding Stock Flipping

Investing can be incredibly challenging even to the seasoned professional.  Often times a single moment can determine whether or not a profit or loss will be realized when trading a stock. These windows can be just as unpredictable as a worm hole in science fiction. However, if a trader is able to take advantage of it they could make a quick profit. Those that trade these windows are often times referred to as the day trader or the flipper. 

Part I: What is a flipper?

A flipper is nothing less than someone that trades stocks throughout the day.  They are often times referred to as day traders but that term has been so bastardized that it has virtually no real meaning anymore and can mean anyone that trades stock daily as a non professional. The flipper, much like shorters are the underbelly of the stock trading society. The trading world knows that they exist, but doesn’t necessarily appreciate their existence. 

Flippers are known for getting in and out of a stock in the same day.  Often times a flipper is someone that is going to get in on news and sell at the first sign of profit.  Most often flippers make a quick $20-$50 and move on to the next stock doing this numerous times throughout the day.  Rather than attempting to make money off of strong runs they attempt to make money off of minimal gains at a time.

Part II: Why flippers are unpopular

Flipping has become pretty unpopular with those that believe in their stocks and those that are hoping for a big rally on the stock. When good news comes out many times flippers will come into a stock in large numbers.  The problem is that when they buy they are ready to sell instantly most of the time not waiting for the stock to reach its highest potential level. Flippers are simply looking for a quick gain and nothing more. This is a strategy that keeps them from taking on substantial risk and often times allows them to secure profits where others lose. 

The biggest issue with flippers is that when they come into a stock they often times are willing to sell at the bid rather than the ask. Since they have no real allegiance to those holding the stock longer they will simple take their money regardless of how they have to do it. This violates a host of unspoken trading rules. Rules that state that someone selling should sell at the ask to help the stock and those that are still in it.  By selling at the bid and selling in quantity they are often times dropping the price of the stock and in many instances will completely kill any chance of a rally. This is especially true when there are numerous people flipping at the same time.  The selling pressure that they can potentially create can have a major impact on the stock.

Most of the time when flippers get into a stock though they aren’t simply in and out. They will normally make several round trip trades on the same stock in a day. This is because they are looking for patterns that most every stock follows.  With most stocks that have news there will be an early rally, a dip, another rally on the dip buying, another dip, and another rally.  Flippers understand this trend and will attempt to take advantage of each dip and rally to make as much as possible on each stock they trade throughout the day. 

Part III: How flippers choose stocks

For most flippers the best way to choose a stock is by doing research. This normally includes scanning for stocks that had an increase in volume at the end of day on the previous day.  As most stocks start moving just prior to news from one type of leak or another a volume increase at the end of the day is normally a sign of things to come. This will allow the flipper to look into the stock to ensure it isn’t already too high. Most flippers look for stocks that are sitting near their 52 week low and should be ready for a bottom bounce on news. They then place it on their daily hot sheet and wait to see if news is coming. 

The way flippers make their money is by being the first in. They set their buys on the ask with numerous stocks that have news.  While half of the stocks will run too fast for them to get any shares, the ones that allow them to grab shares will often run up a little higher. They are looking to buy stocks at a normal range and not chase after them.  This is where new flippers are often caught up in stocks, they attempt to chase a stock that is already moving.  A good flipper is patient and lets any stock run without them if they miss it on their first try. The philosophy is that there will be another stock tomorrow. 

Another way flippers find good stocks is by looking for stocks with a great deal of volume and pricing stability. Often times stocks will trade in channels. The stocks that trade in channels give great daily opportunities for flippers to trade that channel effectively to make money. By monitoring numerous stocks at the same time they are able to find stocks that are known to move up and down throughout the day and will attempt to take advantage of these movements.  Most every stock is constantly moving so a flipper has to find stocks with volume that have a greater chance to move throughout the day.