Do Operators Manipulate Scripts?
An operator is a person who is supposed to drive the market price of a particular share that is he decides what should be the pricing of the share and whether it should go up or down. It is also believed that operators in association with the management of the company first acquire certain stocks in the market and subsequently through rumors and such other communication mechanism create a mass interest in the share. Subsequently once the general public starts believing in the company’s prosperity the operators sells the shares and makes handsome profits. Some operators also use circuit mechanism of stock exchanges to hike the price. The circuit mechanism allows the operator to put an order at a price which is 5, 10% to 20% above the previous days closing. Once the share hits upper circuit, there are very few sellers in the market since they believe that if the share has hit upper circuit it is likely to go up further. This is the modus operandi of an operator. For an operator to be successful some factors are very important such as connivance with the management, low capital base of the company so that manipulation can be done with very little capital and a mass following.
The whole purpose of technical analysis is to determine the balance of demand and supply and the stock market operators are some of the powerful and rich individuals or groups with much buying and selling power. If we are able to track their movement, we will be able to profit from their operations. However, if we are ignorant of their existence, we could be their next meal.
They work individually or in a group.
They rely on the market trends to help them in their mission.
The general publics are their big customers.
They together work with the public listed company owners or insiders.
The bulk of their operation revolved around the accumulation and the distribution of stocks from / to the general publics.
They are rich and powerful figures but they are also humans that have emotions like all of us.
They have extensive credit facilities and lower transaction costs than the retail investors.
They do make mistakes like any one of us. Their mistake costs lakhs of Rupees.
Market news, stock market analyst, corporate announcements, word of mouth advertising, SMS, e-mail, net messengers, internet web-sites, price bidding and order queues are some of their tricks and tools that they used to achieve their main objective.
They don’t try to pick the bottom or the top like most retail investors do. Again, some of them try to do this and it costs them much sorrow and dismay.
They do attempt to manipulate the chart to trick the chartist whether you like it or not (Chart is not everything, price may move because of fixing).
They are both the buyer and seller in the queue order at any given time.
They are not doing charity work. They existed to make your money.
IPO trends are very important to their success and failures. If they judge wrongly on this, they could go bust easily as the power of leveraging will work against them. Remember this, they cannot fight against the trends and they don’t have the strength to do so. Don’t ever think that they can swim against the tides.
It is important to understand them well as they are big volume buyers and sellers. They can tilt the balance of demand and supply. Understanding the above traits of stock market operators will help to clear some of the myths that we have of them. Remember, they are humans like us. Some of the above points deserved to be elaborated further to bring out the secrets of trading methodologies that we will employ in our technical analysis.
If their mission objective is to acquire stocks, they might push down the prices to cause temporary market panics to squeeze out the stocks out from the speculators and investors. The success of this technique will depends on what sort of people that are holding the stocks. This will get rid of the intraday and short term traders. Remember, intra-day trading is zero-sum game. You may make money on one day, but certainly you will break the money the other day. However, they will try to maintain the prices around a certain range as to keep the sellers motivated. Usually the public listed company owners and insider will work in tandem to collect the shares from the general public. After they exhausted the fearful speculators and investors, they will then turn their eyes to the stronger speculators and investors by pushing up the prices higher to catch their interests.
If their mission is to distribute stocks, they will push up the stock prices to catch the attention of speculators and investors. They will work with market analyst to create beautiful pictures of the company prospects. They will work with the public listed company owners and insiders to create scarcity of stocks. At this moment of time, they will also announce all the good news while pushing up the stock prices. They will queue up as buyers and sellers in the order queue. They will buy their own stocks to create volume to entice the crowd to follow. As they bid up and down the prices, stocks were distributed without the awareness of the general public.
We always blame the regulators, brokers and exchanges if scams happen in markets. However the menace of operators will go only if we stop following their leads in the market. Tips given by operators are widely followed, and so long as you make money on these tips we do not blame anyone. However, once the operator weakens then there is fall in prices and the blame game starts. Operators are creations of society and the greed inherent in all of us. Easy money by riding the operator’s tips is a strong attraction. Scams bring down the prices of not only the shares which were manipulated by the operators but also all other fundamentally good shares also held by us.
Mass following that the operators thrives on would be absent if we refrain from buying those shares that are remotely associated with any operator.
I believe that this write-up will increase our trading knowledge and make us a wiser trader. Some Board Members are writing Posts informing how investors / traders can profit from their operation and doing a great job. Some people are unnecessarily blaming them as Operators. They need to realize that we are fighting with people who have money, tools, knowledge & lastly, (but not least) price sensitive inside information that are far superior compared to us.
Zerodha (Trading & Demat Account)
RHP
