[NEWS] - What is Market Manipulation? Know to avoid unwanted effects

Recently, there have been a series of violations and market manipulations detected and handled by regulatory agencies. Therefore, we need to know useful information to protect ourselves from market manipulation.

First, we need to know about what is market manipulation? Market manipulation is the act of intentionally influencing the market by applying the law of supply and demand or other artificial acts, to affect the price of securities, to achieve the goal of its own benefit.

In other words, market manipulation is a form of market abuse, spreading market misinformation, entering buy and selling orders for the same stock code at the same price, concealing the ownership rate when the law requires reporting.

For example, on March 29, the police investigating the Ministry of Public Security investigated and verified a large corporation in Vietnam and related companies for "Manipulating the stock market", "Hiding information in securities activities" occurred on January 10, 2022. As we already know that market manipulation causes serious damage to investors, affecting the operation of Vietnam’s stock market.

According to nasdaq, the best way for investors to protect themselves from stock market manipulation is to make long-term investments. Investors need to understand the types of market manipulation to make better investment decisions.

According to Investopedia, there are five ways to manipulate the stock market. In fact, manipulation is rampant in today’s stock market. Understanding how to manipulate the market will help investors have an advantage and earn more profit.

1. Fake News (fake news)

This is a method of spreading misinformation, misleading about a company. Some investors try to spread fake news about a company or even the entire market to get the market moving in their favor. Therefore, individual investors need to thoroughly verify the source of information before deciding is the best way to avoid this manipulation.

2. Pump and Dump (pump and discharge)

This is the method used to buy a large amount of stock causing the price and quantity to spike. At a certain point, the person performing the price pump will sell most or all of his stock for a profit. After that, the share price will plunge and when investors find out it is too late, the latter buyers are the ones who bear the most losses.

The way to protect yourself from those price injections and dumpings is to avoid buying stocks that are rising too high above normal.

3. Spoofing The Tape (create fake buy orders)

This is the form in which market manipulators will order large amounts of stock but have no real intention of buying. After a large number of investors buy, these market manipulators withdraw their buy orders a few seconds in advance. After the manipulator pulls the order back, the market will go down. Eventually, other investors will suffer losses after falling into the trap.

Therefore, according to Investopedia, the way for investors to protect themselves in this case is to avoid short-term investments.

4. Wash Trading (buy and sell the same code continuously and instantly)

This form takes place when large investors make the purchase and sale of the same type of code continuously and almost immediately. The rapid buying and selling increases volume, attracting investors by soaring volumes. Therefore, there will be many short-term investors who are tricked and create benefits for those who are manipulating the market.

Therefore, the best way in this case is still to focus on long-term rather than short-term investments.

5. Bear Raiding (the hunt for a down price)

In this case, investors banded together to push the stock price lower through short selling and spreading unfavorable rumors about the company. The purpose of this method is still to create a trap to lure investors who do not understand the tricks of market manipulation.

According to Investopedia, in this case, if the investor understands how the market works, it is possible to avoid risk and profitability.

Ngoc Duc

Compiled from the Economic Rhythm, Government Newspaper