Stock Operators are individuals in the stock market who control significantly higher trading capital, and have the ability to influence the price of a stock through their buying and selling actions.
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How do Stock Operators Affect Stock Prices?
Stock operators use a variety of techniques to influence share prices. They generally target penny and smallcap stocks because these stocks have a lower Marketcap and require less capital to influence.
1. High Trading Capital
Due to the sheer size of their trading capital, whenever these operators buy, there is a significant demand generated pushing up the prices of the stock. This happens because their trading capital is often much more than the Marketcap of the stock that they wish to manipulate.
The source of their funds can be varied. Sometimes its their own money, sometimes they take loans from banks and sometimes they source money from the capital assets under their management.
2. Access to the Bulk Order Book
Bulk order books are similar to normal order books in a stock market but are made for bulk deals(0.5% or more of total shares of the company). Most retail investors do not have access to bulk orders order book.
Stock operators use softwares like Bloomberg Terminal which alerts them in advance that a bulk order has been posted in the order book. These orders often take time to get executed because the market does not have that kind of liquidity on a short notice.
3. Generating False Volume through Circular Trading
Stock operators trade among themselves to make the impression that a stock has high volume say on a particular day. They buy and sell amongst themselves. This is known as circular trading.
Retail investors are lured because they often take is as a signal that there might be a rally coming. Once the retail money comes to buy the stock, these operators sell their stocks at a higher price and the retail investor gets stuck.
How can I identify if a stock is being operated by operators?
Here are a few ways to identify if a stock is being operated by Stock Operators.
- An easy way to identify stocks that are being manipulated is that all of a sudden a stock goes up 5% or 10% in a day which has been stuck at a certain price for the past several days or weeks.
- Another way to identify is a stock which has high trading volume but only moves in a certain trading range. It is a way to lure retail investors who think there is a price action about to happen in that stock. Unsuspecting trades buy that stock and get stuck because after a few days the stock only hits lower circuit continuously till the new prices are only a fraction of their older levels.
How do stock market operators choose a company to manipulate?
1. Unknown Stocks
The secret to a successful stock manipulation lies in the fact that operators manipulate stocks that are not known to the common retail trader. Since the price action is so fast, retailers do not have the time to do due diligence on the fundamentals or investigate the news as to why the stock price is moving so fast.
2. False News or Misinformation
Another way how prices are manipulated is through fake news. Operators spread fake news that there is going to be something big happening like a foreign investor investing in an Indian bank when there is not confirmation. Then when the retail traders come, they unsuspectingly buy that share and are stuck at higher prices when operators offload their investments.
Frequently Asked Questions
Who are stock operators in India?
Stock operators in India are people with trading capital so high that they have the ability to influence trading volumes by placing high volume of buy and sell orders.
How does operators control and manipulate the prices of stocks?
Operators generally have much higher trading capital than the market cap of the companies they manipulate. Their buy orders are so huge that it sends up the price of the stock to an upper circuit. Similarly their sell orders can easily tank the prices of the shares they wish to manipulate.
What is meant by operator driven stock in the stock market?
In a stock market, an operator driven stock is one which has been manipulated so many times that it is a common knowledge that the stock is driven by operators.
Are operators real in the stock market?
Yes, operators are those individuals that command a high capital and are able to influence stock prices through buying or selling or spreading misinformation.
What are some real stock operator stories?
An example of a stock manipulation was when one of the biggest investors in the world, known as the Oracle of some area in the USA, was rumored to have invested in a certain Indian Private Bank. This caused the stock, a largecap was manipulated using false rumors. The price rose and fall within the same day, while the operator bought both longs and sold the shorts to make money both sides.
Is Stock Operating illegal in India?
It is too hard to detect stock operators because they generally buy and sell like normal traders. However, there can be action taken on spreading rumors and misinformation. Further, there is a lot of regulations on insider trading because operators often collude with insiders to operate stocks.