If you are investing or trading in the stock market, you might have noticed that stock prices dramatically increase or decrease from time to time. There are many factors that affect the prices of stocks listed in the stock market. However, there are also chances that the price fluctuation is driven by operators.
But who are operators in the stock market, and how do they manipulate the stock prices? This may be the question that may be arising in your mind. Don’t worry; we have compiled this article to give answers to all of your queries about operators of the stock market.
Who Are Operators in Share Market?
Stock operators are traders, investors, or participants in the stock market who trade intending to manipulate the stock price by increasing stock volume. When they increase the stock volume in the stock market through trading in a circle and increasing the stock’s price, the stock prices continue to rise. When general investors see this upside boost in stock prices, they purchase them hoping to make short-term profits. The stock operators sell their stocks to general investors, which often causes a fall in stock prices.
And when panic rushes, the stock price decreases and investors wish to sell their purchased holdings in the market. As a result, stock manipulators make significant profits by buying the stocks again at the lowest price. In most cases, the stock operators target small-cap and penny stocks because these are easy to manipulate and generate profits from trade.
How Do Operators Manipulate Stock Prices?
Let us understand how operators in the stock market affect stock prices. Below are two common ways that are greatly used by operators.
Order Book Strategy
The order book records the continuous orders put by the investors for particular stocks. It shows the number of stocks bought or sold at various prices. Currently, the order book shows the records of stocks that can be bought or sold at a price in digital format and are accessible to each of the traders involved in stock market trading.
However, the stock operators may carry more information than is available in the order book. This is where the retail investor may be unaware of the total number of orders against the buy and sell quantities of the selected stocks as the retail traders can only the five to twenty price points at a time. Although, if they can access more data, they can easily determine if stock prices are manipulated by stock manipulators.
As they are unaware of the additional information, they might be unable to determine that all buyers and sellers are genuine. As a result, they participate in trade and bear more risk than the operators.
Day Trading Strategy
Day trading or intraday trading strategy is another way operators in the stock market can affect the stock prices of penny or mid-cap stocks. In day trading, the trader makes a profit from buying and selling the stock on the same day and earns a different amount as profit. Even if the trader does not square off their position, they automatically get closed by the selected stock broker. During a volatile stock market, there are many opportunities where stock market operators can attempt to affect stock prices by trading in mass and leveraging the available square-off position feature.
For example, if the stock operator sells most of his holdings intraday, then the prices of the shares will start lowering in the middle of the day compared to when they were sold before. It will cause panic among regular investors, and they will also begin selling their stocks to avoid further losses, which may again lower the prices of the stocks.
At the same time, the operator will buy back those shares using their algo trading software at a much lower price. This way, stock manipulators can make a significant profit if the stock prices rise again before closing the stock market. However, this type of trading activity is hard to interpret; therefore, operators use algo trading software and many credible resources to significantly frame their trading strategy and profit. However, if you are a beginner, avoiding this type of trading is best, as it can cause significant losses.
Is Stock Operating Illegal?
Stock operating is not an illegal trading activity unless it is executed ethically. For example, suppose a CEO of a company purchases the company’s shares or employees of the company get shares of the company where they work. In that case, it is generally called legal insider trading, a legal trading activity.
Do Stock Operators Exist in Real?
Stock Operators exist in the stock market in real life, and they use various algo trading software to manipulate the stock prices to make personal gains.
Can One Affect the Stock Prices in the Share Market?
It’s possible to make artificial changes in stock prices. One needs to buy or sell a particular number of shares at a high volume in the open market, which will either give an upward or downward trend. Operators in the stock market make a profit from this technique only.
What Do Stock Manipulators Do in the Stock Market?
Stock manipulators are also called operators. They are mainly involved in impacting the stock prices through day trading or order book strategy to profit from the difference between buy and sell prices.
In this article, we discussed operators in the stock market and how they manipulate the stock prices using order book manipulations and intraday trading strategies. Using algo trading software, these traders affect the stock prices and market conditions to make significant gains.
However, if you are a normal trader, you should first check whether stock prices are manipulated by operators. Once you get any news, you should keep yourself out of the trading activity. Or you can even check out other strategies to find favorable trading opportunities to gain. We hope you clearly know who stock operators are and how they work.