An algo (algorithm) that searches for stocks with relatively limited volume and a thin order book that nevertheless can create some market impact. When a stock is spotted, the algo places a few small orders on the offer side and many large orders on the bid side. The large buy orders will allure other unsophisticated algorithms into action as they deem these orders a signal to buy. These algorithms will buy from the hijackers’ orders on the offer. At this stage, the hijacker will pull the large buy orders and place large sell orders. Likewise, the unsophisticated algorithm will deem this a signal to sell, and as such will sell to the hijacker, hitting its bid orders. The outcome: the hijacker locks in a profit.
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