The price of stocks in the share market changes every minute. But there are some times when the prices fall dramatically in a small period with no external reason whatsoever. This happens because of the stock market operators. In this blog, we will discuss them and how they influence traders of the stock market.
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Who are the stock market operators?
Stock market operators are the people who artificially boost volumes in stocks by trading in circles and increasing the price of the securities. They are often referred to as the manipulators of the share market. When the traders start purchasing the share to book quick profits, the manipulators sell their shares which results in a fall in the share price.
With the prices falling, the traders then want to sell their stocks, but there are no buyers present, and the manipulators book great profits in this. The main target of the manipulators is the small-cap and mid-cap stocks.
How Do the Operators in Stock Market Influence Investor’s Decisions?
The stock market operators can influence the investor to buy any stock in two ways. One is through the order book, and the other is intraday trading.
If you’re confused between investment and trading, then you can read this article – it is an in-depth guide.
The order book is a key influencer for retail investors. It lists different buying and selling orders for a specific stock. The order book shows the number of stocks in the market that people are willing to buy and sell at different prices.
Retail investors can only see the details of the next 5 orders but not of the orders beyond that point, while the operators in stock market have access to view beyond that. If retail investors can see all of the orders, they can also figure out that the operators are placing fake orders in the market.
Intraday trading means the buying and selling of shares take place during market hours. It is often referred to as day trading, as the position of the trader has to be squared off before the end of the day’s trading session. A volatile stock market is a suitable place for such a kind of trade.
The stock market operators influence the price by trading in bulk and then squaring off their position at the end of the trading day.
Let us assume that the operators in stock market start selling the stock during mid-day, which lowers the stock prices. This creates a panic situation for retail investors, who, to prevent themselves from further losses, start selling the stocks. Through this method, the operators in the stock market can book heavy profits in a single day.
The tricks that the stock market operators adopt in trading are complex and very difficult for a simple retail investor to understand. Investors can prevent themselves from incurring huge losses by using stop losses and various other methods.
What Is The Pump And Dump Scam?
It is the illegal act of an investor where they promote a stock that they are holding by recommending it based on false and misleading statements. This scheme is now even more prevalent as people start to use the internet.
In this scheme, the fraudsters post messages online to buy a stock quickly with a claim to have inside information. This will result in a rise in the price of the stock. Once the shares have been bought, they will sell the shares, causing the share’s price to drop. In the end, the new investors will lose their money.
Usually, small and mid-cap stocks are targeted through these schemes as they can be manipulated easily. This scheme promoters create hype and rumours of that stock, thus increasing the price of that share.
The stock market operators include several brokers, speculators, etc., who work together to move the stock prices according to their needs. For an investor, the methods of working of the operators may be difficult, and he may incur loss due to it. But if he uses stop loss and other techniques to safeguard himself, he can exit the trade with some minimum or no loss at all.
The traders who are starting to trade need to be careful as they cannot be told if the operators in stock market have operated in stock or not.
Is Stock Operating Illegal?
Stock operating is only legal when it is done ethically. Insider trading is allowed, but the activities must be recorded on the stock exchanges.
How would you know that a stock operator has operated in the market?
If there is a spike in the price of a stock without a justification or preamble, it can be said that a stock operator may have spread a rumour so that the price of the stock increases.
What is the role of an operator in the stock market?
The stock operators work together to rapidly move stock prices, creating a frenzy among the investors through which they can book profits.
How do the operators In Stock Market operate the prices of a stock?
The stock market operators spread false information, which results in a price rise, and then when it has increased substantially, they sell the shares, which results in the fall of the price.