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Market Manipulation by "Smart Money"

This is a US video but it’s important for us in India as well, because we are as prone to manipulation. Tom Williams, retired syndicate trader and Chairman of Tradeguider spills the beans about how professional traders, exchanges and media manipulate the market.

Jim Cramer, a maverick trader, reveals how hedge funds can manipulate the futures market very easily and with very little money.

“It doesn’t take much money” he says, saying that $5 million to $10 million can move a stock in the US. We are a much smaller market, and I’d say even amounts like 10 crores can move stocks – don’t you think enough “smart money” people have 10 crores to move a stock?

Pure fundamentals may not move a stock price up because of such manipulation. But then how do you know manipulation is going on? If the prices of something move rapidly on “non-events” or simply for the heck of it – there is some level of manipulation.

People that attempt to use purely fundamental data to assess a situation can be massacred because it is so easy to move stocks nowadays. In february 2007, very few fundamentals had changed – yet the market fell 10%. Today, on the back of a good set of results the market is back to the 14,000 levels on the sensex.

If we all persist on investing in purely value, or purely on fundamentals, we may just have it wrong. We need to look at information beyond the obvious, like sudden changes in volume traded and how, in the past, such volume changes affected your stocks.

Sure, this can be done easily on a computer, yet there are no websites that will give you such alerts for the Indian markets. Or do you know of any?

  • Anonymous says:

    >Sigh! A very good reason to become an investor rather than a trader, unless one knows how to deal with manipulations. This makes me wary of starting online trading anytime soon.

  • Anonymous says:

    >Last year a bollywood movie with the name ‘Gafla’ was released.Not a great movie but a decent attempt to expose the manipulations/scams in the market.Worth a dekho!!

  • mark says:

    >So where does that leave us? the individual investor? Do we try and learn the tricks so we can avoid getting hammered? and if so how? or is there a way around this? Deepak what are your thoughts and how do we protect ourselves? That is the KEY to my mind. How do we protect our investments?

  • Deepak Shenoy says:

    >Mark: We just have to learn from our mistakes. I will try and unearth patterns which stink of manipulation. If you have links please let me know too.

    What we need to do is not to work against manipulation (we can complain to SEBI, but that’s all we can do) – but to actively avoid situations where manipulation seems to be happening.

    Let’s find out how.

  • Deepak says:

    >I am not sure if any site is offering marketwise triggers… I trade thru sharekhan, need to check but check the protfolio tracker at it has a good alert system…. only problem its stock specific.. so u will need to setup individually….

    Deepak M Nadiger

  • Deepak Shenoy says:

    >Good point Deepak – I don’t mind stock specific alerts but I would like to know about manipulation, like sudden upmoves or downmoves, volume triggers, insider buying or selling and such….I am registered at iWealth which sent me some news on Balaji long after I knew and has not sent me anythign today despite a 10% upmove in a single day on extremely high volumes!

    Moneycontrol has alerts on block deals (which are of no use in reality) and most other sites have elementary stuff.

    In fact I want to know if the manipulation is against me – certain triggers will be alerted; these are known triggers but nobody offers alerts or even emails that let you know.

  • V.M.Kombath says:

    >Can we build this alert ?
    Since we can get price and volume information from yahoo site can we build an alert system.

    Can you tell me how to set up triggers ?
    What are the parameters to measure ?

    For example 10% more volume then the day before or some thing

  • Deepak Shenoy says:

    >Kombath: That’s very true. Volume spikes (greater than 10 day EMA or 50 Day EMA) and price spikes are important.

    But how important? We need to go back historically and see what parameter actually indicates a price hike. There are a number of theories but I think we should look at history and see instances of manipulation and how perhaps we can track them today.

    I have some ideas on this front but that will be a different post – plus, nothing is crystallised.

  • Anonymous says:

    >Dear Deepak,

    I am new investor and want to invest in share market. I understand that I need demat account and trading account. Where I can have more info which will help me to choose cheaper charges and good service for both the accouts? Is it cheaper to have demat account and trade thru brokers instead of going to bank.


  • Kapil says:

    >Do you know of a website that can give an alert on a mobile/email when a stock touches the limits that you set?

  • Deepak Shenoy says:

    >kapil: I think a number of sites do that, including moneycontrol, yahoo and so on. Sharekhan also has such alerts for registered subscribers.

  • hello says:

    >i think u go wrong ,it’s not ,plz correct your mistake.