Hey Joe! You've said that prices are not always moved by supply and demand; That they are heavily manipulated in some cases. We know that they intentionally run the stops, but what else do they do?
Besides intentional stop running, those who have the power to move prices often resort to other dirty tricks. This may be more-true of stocks and Forex than of futures, but I believe all of the tricks below occur in all markets.
Dirty Trick #1: The Pump and Dump
You probably have heard of this before, but I'm amazed at how many are not aware of this kind of maneuvering.
Manipulators can pump prices up by "leaking" good news -- which is totally false -- in an attempt to sucker clueless traders/investors into buying the underlying.
When the price rises to a point they like, the pumper sells for an artificially large profit...or they can go short, and ride it down as traders/investors learn that the positive story was nothing more than fake news.
Dirty Trick #2: The Poop and Scoop
Exactly the opposite of a Pump and Dump. Bad news is manufactured and spread to send prices tumbling...enabling the manipulator to buy a targeted asset at a lower price.
Dirty Trick #3: Stop-running
This is when manipulators push price down to purposefully trigger stop losses others have placed in the market.
That knocks individual traders/investors out of their positions and gives manipulators the chance to swoop in and pick up what they want at big discounts. Keep in mind that all they are doing is filling orders, giving you an efficient market. At least that's what they say.
It's not personal. It's just business…
Dirty Trick #4: Spoofing
– or using phony orders to nudge prices to a more favorable level, and then taking the other side of the trade.
Dirty Trick #5 is Front-Running their own clients' orders
Yes, it could be happening to you…
Brokers know what their clients are buying and selling before the trade happens. Do you think none of them are ever tempted to buy or sell before entering your orders...or tipping their friends off? It happens more than you think.
Brokers steal chunks of profit from their clients by using their advance knowledge of these trades. And they still charge you the transaction fees!
In April 2018, a senior executive from banking giant HSBC was sentenced to 2 years in prison for a front-running scheme that stole $8 million in 2016. And he's just one recent example.
Dirty Trick #6, Dark Pool Trading.
In case you haven't heard of them, dark pools are private exchanges where manipulators can buy and sell without the knowledge or participation of ordinary traders/investors…
Recent calculations indicate that twice as many stocks and ETFs are traded in dark pools than on the New York Stock Exchange. Who knows what's really going on in those backroom deals...
And the list of underhanded moves goes on and on.
Dirty Trick #7, Buying their own offer and possible selling their own bid
This has been done at times when the "Plunge Protection Team" has been in the market. Their action at times has been totally against exchange rules, and may even have been against the law.
In 1989, when prices began to plunge as they did in 1987, Goldman Sachs, at the behest of the U.S. Treasury Department came down to the S&P 500 trading floor, and began to offer higher prices, and then bought their own offer as a way to lift the S&P 500 to higher levels and stop the crash.
Eventually, this action by Goldman Sachs came to be known as "The Plunge Protection Team." PPT is a colloquial name given to the "Working Group on Financial Markets." Created in 1988 to provide financial and economic recommendations to the U.S. President during turbulent market times, this group is headed by the Secretary of the Treasury; other members include the Chairman of the Board of Governors of the Federal Reserve, the Chairman of the Securities and Exchange Commission and the Chairman of the Commodity Futures Trading Commission (or the aides or officials they designate to represent them). The group now consists of a number of large brokerage firms, and is housed in the Caribbean. Their orders come in via a numbered account, so they remain anonymous. The U.S. does not want it generally known that such a group exists. Prior to the crash of 1987, the U.S. government had never interfered with the free market.
These are just a few of the reasons most traders/investors haven't been as successful as they could have and should have been.
But even if the manipulators decided to abandon them all and "play by the rules," they're still firmly in control of prices. It's not fair, but it is reality. To put it plainly, the manipulators literally control supply and demand.
That means they control price in a very real way.
Perhaps that's the dirtiest trick of all! I know this is disturbing information, especially if it's the first time you hear it. But I'm not telling you this to scare you. I'm telling you this because you need to know. You need to protect yourself from being blindsided by unnecessary losses – losses that have been out of your control in the past.
Is it possible to turn things around? Let's face it: you've been misinformed about how markets work.
Yes, there is a way to turn things around, you have to learn to trade what you see on a price chart. This is what Chart Scan is all about.
We want to hear from you, Joe Ross wants you to learn trading. Email us your questions or if you need additional information. Another great investment is private mentoring with Joe, our students find this very helpful and accelerates their trading successes.