Hello friends, in today’s blog, we see Rite Share Price Manipulation, and their Technical Analysis. so let’s learn, why people manipulate the share price, and how retail Investor lose money in this type of stocks.
Trading in the Zone Book Summary
Rite Share Price Manipulation
Today’s stock fall almost 50%, and most of the retail trader traped in upper range. so learn how much stocks will fall. what are the level of stocks, followed are the image for reference.
so, if you are ready to wait for long term, then you must hold your stocks, after seeing the fundamental analysis.
let’s learn why people manipulate the stock.
Stock manipulation:-
Stock manipulation occurs when individuals or groups deliberately influence the price or trading volume of a stock for personal gain, often at the expense of other investors. This unethical and illegal practice can take many forms and arises due to various motivations. Here are some of the primary reasons why stock manipulation occurs:
1. Profit Incentives
- Insider Trading: People with privileged access to confidential information about a company may manipulate stock prices to capitalize on upcoming news, such as mergers, earnings reports, or product launches. This allows them to buy or sell shares before the public is aware, making significant profits.
- Pump and Dump Schemes: In these schemes, manipulators artificially inflate a stock’s price (pump) through misleading statements or rumors. Once the price has risen, they sell off their shares at the inflated price (dump), leaving unsuspecting investors with losses as the price crashes.
- Short-and-Distort Schemes: This is the reverse of pump and dump. Manipulators spread negative rumors or false information to drive a stock’s price down after they have taken short positions, allowing them to profit from the decline.
2. Liquidity Manipulation
- Creating False Liquidity: Market manipulators may place large orders at specific price points to create the illusion of demand or supply. This draws other investors into the stock, thinking there’s high interest in the stock. Once enough investors are in, manipulators can reverse their position, often at a profit.
- Wash Trading: In this practice, manipulators buy and sell the same security simultaneously, creating the illusion of increased activity and liquidity without any real change in ownership. This can mislead other traders into believing there’s more interest in the stock than there actually is.
3. Market Power and Influence
- Large Shareholders: Institutional investors, hedge funds, or insiders with significant holdings may move a stock price in their favor by making large trades, influencing market perception. For example, a big sell-off could signal distress to other investors, driving prices lower and allowing them to buy back the stock at a lower price.
- Algorithmic Manipulation: With the rise of high-frequency trading and algorithms, some traders exploit small discrepancies in the market to move stock prices. These small moves can trigger automated buy or sell orders, causing rapid price changes.
4. Media and Information Manipulation
- Disseminating Fake News: Manipulators often spread false or misleading news through online forums, blogs, social media, or even mainstream news outlets to influence the perception of a stock. Retail investors may react to this news by buying or selling, allowing the manipulator to profit.
- Influence of Social Media: Platforms like Twitter, Reddit, and others have become fertile ground for manipulation, where influencers with large followings can hype certain stocks. This can lead to a quick, artificial increase in stock prices (or decreases), creating opportunities for manipulative actors to profit.
5. Low-Regulation Environments
- Penny Stocks and OTC Markets: Stock manipulation is more common in lower-regulation environments, such as penny stocks or over-the-counter (OTC) markets. These markets tend to have lower liquidity and less regulatory oversight, making it easier for manipulators to influence prices without detection.
- Lack of Regulatory Enforcement: When markets have weaker enforcement of securities laws or insufficient oversight, it opens the door for manipulation. Market actors are more likely to engage in fraudulent activities if they believe they won’t face significant consequences.
6. Psychological Exploitation
- Fear and Greed: Manipulators prey on the natural emotions of fear and greed in the market. By driving prices up or down through rumors or market orders, they can induce panic buying or selling. Once other investors react to these artificially created moves, manipulators take advantage of the resulting volatility to lock in profits.
- Herd Mentality: When people see others buying or selling stocks aggressively, they tend to follow suit, thinking others have access to better information. Manipulators exploit this herd mentality by creating artificial movements in the stock price to draw in more investors.
7. Thinly Traded Stocks
- Low Liquidity Stocks: Manipulators often target stocks that have low trading volumes because it’s easier to influence the price with relatively small amounts of money. By buying a large number of shares or spreading rumors, they can create noticeable price swings that attract other traders.
8. Market Access and Complexity
- Access to Derivatives: Traders with access to sophisticated financial instruments such as options or futures can manipulate stock prices to benefit from their derivative positions. For example, they could manipulate the underlying stock price to make a profit on a related options trade.
- Complex Financial Instruments: In some cases, sophisticated traders or institutions use complex financial instruments to manipulate stock prices in subtle ways. These strategies often involve derivative contracts or other assets, and the manipulation may not be obvious to the average retail investor.
Consequences of Stock Manipulation
Stock manipulation can cause significant harm to retail investors and the integrity of the financial markets. Investors may suffer severe financial losses, while market efficiency and trust erode.
Regulatory agencies like the Securities and Exchange Board of India (SEBI) in India actively combat stock manipulation through enforcement actions, penalties, and continuous monitoring, though it’s a challenge to catch every instance.
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