Market manipulation in trading

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Image made using canva

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Introduction

Good day every it's another beautiful day today, slowly we are coming to the end of this week .

Though the week had been frustrating as steemit site was unavailable due to server maintenance and other things, but are happy that this technicalities are slowly over.

Today on my blog I would be talking about Market manipulation in trading, for many of us who trade crypto currencies we often wonder why is it Soo hard well I will educate you on why.

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The word market manipulation is gotten from two English words market and manipulation each meaning two distinct things but when put together forms one word

Market

This is any location whereby buying and selling takes place. A market is not restricted to only physical location but can be virtual as well.

This is due to how the world has been advancing recently they are physically markets where we buy physical commodity such as local markets and malls.

We also have virtual market such as we're we buy and sell virtual items such as the stick market, the forex market, the crypto market and others.

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Manipulation

This the act whereby an individual is able to control the actions of another.
The act of manipulation is not limited to the control of another individual it extends far beyond that as materials can be manipulated to suit the needs of man for our daily use.

Generally the object or individual being manipulated is either unaware of the fact that he is being manipulated or can simply do nothing about this fact.

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Source

Due to the very nature of the crypto market which accepts both individuals and large entities to participate in the process of buying and selling , this offers big institution the ability to control the direction of the market to beat suit Thier personal need.

The prices of various token is gotten through the interaction between the buyers and sellers in the crypto market in therefore means that whoever has a large amount of money and with proper timing can use his or her money to influence the direction in which the price is going.

In a situation wherby the volume of sells is higher than the volume of buyers is therefore would mean that the price of such a commodity would decrease irrespective of the number of people that are buying, hence the amount of money you use when trading crypto currencies give you an edge as to pushing the price in your favour.

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They are various ways in which those with large amount of money can manipulate the market in Thier direction and often time when they do this it goes against the favor of the masses.

Stop lose hunting

This is the process whereby the big players in the market pump the market with enough money to go in the opposite direction of the trend for a short while to meet the stop loses of various retail traders and liquidate them.

_{source: trading view}

Form the example above we can see that though the price was on a downward trend we saw that long wick of the candle go all the way up before coming down and continuing the trend.

This is how stoploss hunting works, by mere looking at the charts the big players can ascertain where majority of retail traders stop lose would be so they enter the trade in the opposite direction of the trade to liquidate those traders.

The big players are only able to move the market momentarily in their favor, cause they have a huge capital but they are unable to entirely change the direction of the market this is because the market is bigger than them but by buying a large amount at once they are able to momentarily overwhelm the market and make Thier money fast.

When a sell trade is closed by stop lose it adds liquidity to buying side, hence by timing it right they are able to hit a lot of Sellers stop lose and give the market buying liquidity, the same happens when a buy is closed.

Stop loss hunting work but in a bearish and bullish market.

Trend change

This is a situation whereby a group of big players in the market decide to gather Thier rescources and change the overall direction of the market for a period longer than the stop loss hunting period

It is not strange to see that during a string downward trend we tend to see strong bullish price action movement causing us to close our sell positions and enter into buying position.

The trend change is a tactic used by big players to gather enough liquidity from various retail traders before switching the direction of the market.

_{source: trading view}

From the image above we can see that though the price was on an uptrend we saw strong bearish movements, this would cause many traders to assume that the upward trend is over and close Thier trades in favour of a sell.

What then happens is that after a short period of time we see the market start to spike up liquidity all those who had open a short period.

This is a more ruthless form of manipulation as it requires collaborative thinking and planning by various big players.

Mis information

This is a form of market manipulation we see where by major players in the crypto, stock or forex market make certain statements publicly which can affect the direction in which price is going.

Market manipulation using information is done in all forms of virtual market.

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In crypto
By late last year we saw Elon Musk do this Soo often with doge coin often times a speech from Elon Musk would send doge coin 100% up while other times it would send it-30% up it all depends.

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In forex
Every first Friday of the month There is what we call NFP (new farm payrol) which is released by the bureau of statistics and this news has the capacity to greatly impact on the direction of the market in the hours after its release.

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In stocks

Early this week we saw what happens to the stock market when Amazon announced that they would be doing a 20 is to 1 of Thier stocks, this saw the whole market on Monday take a huge tank.

Elon must said recently that he would be laying off 10% of his employees and we saw Tesla shares tank as well.

frequently asked question

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So far from all indications it is not illegal what many of this people do according to the law, but ethically it is wrong for you to purposely attempt to liquidate traders because you have a big capital then they do.

Market manipulation is still in law with the theory of supply and demand those in higher places have discover a way to make the market work in Thier favor.

It is not illegal just morally wrong.

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You have to understand that the way the market works.

For you to make money in market it means another person has to lose money and they having a large amount of capital would not make much money if everyone where trading in the right direction.

They have to trade against the direction of the market to make Thier money very fast and be out.

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Yes in actual fact you can beat the market manipulation, you can use market manipulation in your favour.

What's to do to beat market manipulation

1. do not set your stop lose too close to demand or supply zone as this are the area many stopless are

2. before placing trades on the lower time frame always go out to the higher time frame to know what the market is doing

3. try to stay as informed as possible so as to get news ahead of other.

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The process of trading is actually very simple it follows a very simple concept but low sell high.

It is the presnce of manipulation that makes this simple concept as various individuals are trying to push low prices lower and liquidate you.

By understanding how market manipulation works we too can become better trading and have an edge over those who wish to. Manipulate us.