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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?


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