From 1999 to 2001 Share Broker Ketan Parekh artificially increase price of 10 stocks (KP-10) by Circular Trading and sells own shares at high price and makes huge profit. But by this circular trading small retail investors getting huge loss, who didn’t know about circular trading.
So what is exact Trap..
Circular trading also called synchronized Trading or Pump and Dump Operation. Retail traders must know how to Circular Trading work hence they can avoid becoming victim next time.
First Operator (Manipulator) chose Small or Mid-Size Company in which most of the holding is in Promoters hand (60-70%). Operator convinces promoters that your company’s stock price is low; we will increase your company’s stock price by 10 -20 Times (1000% -2000%) within some weeks or months. By increased share price promoters will be highly benefited hence they agree the Deal.
So what’s the Deal?
To increase stock price hugely within small period promoters give some share holdings as well money to Operator. Then operation Pump (Price Increase) begins. Operators give information about the deal to his group of Brokers and sub brokers. These people start trading in that particular company stock with big block orders at Certain Time on Certain Exchange at Certain Price. The Insider peoples in the company getting hint about the deal and they start buying their own companies shares. Technical analyst watch the stock and give Buy call because price and volume in the share increasing drastically. Now the small Retail Traders and Investors who rely on Broker, sub broker, Technical analyst begins buying this share.
Now Fundamental analyst turns come in. Operator “Deal” with some fundamental analyst and they start telling from various media that this share is Hidden Gem and Future Multibagger. They give buy call on this share. Now Companies CFO comes ahead and gives assurance of company’s future growth.
At last some “Incentive” given to Mutual Fund managers and FII to buy this share. Now share price start flying like a rocket and start getting upper circuit. Some Banks approved this share in their list and lend money on this share.
The cunning Operator watches this game carefully. When the Price Target fixed in the deal completes The cunning Operator (Manipulator) and company promoters behind all this operation start selling their shares slowly and steadily,. This is called Operation Dump (price decrease)
Now as share price start continuous falling, Technical analyst gives Sell call on this share. Day traders stop loss start triggered, banks who lend money on this share start Margin call. As share start hugely falling hence there is Panic in the market and share price getting lower circuit or listed in the Trade to Trade group. After some days company get Delist from the stock exchange. The cunning operator and promoters celebrates Diwali :lol: and small retail traders Diwala!
Conclusion:
Small retail traders should stay away from investing or trading in the Small Cap, Mid Cap companies whose More and Real information is not available. Retail Investor should invest in Blue Chip companies after studying that company and Invest for Long Term. Especially with SIP.
P.S. Market Manipulation is up 37% in the last decade, According to U.S. Securities and Exchange Commission (SEC).
Thanks
"The stock market is filled with individuals who know the price of everything, but the value of nothing."- Philip Arthur Fisher
So what is exact Trap..
Circular trading also called synchronized Trading or Pump and Dump Operation. Retail traders must know how to Circular Trading work hence they can avoid becoming victim next time.
First Operator (Manipulator) chose Small or Mid-Size Company in which most of the holding is in Promoters hand (60-70%). Operator convinces promoters that your company’s stock price is low; we will increase your company’s stock price by 10 -20 Times (1000% -2000%) within some weeks or months. By increased share price promoters will be highly benefited hence they agree the Deal.
So what’s the Deal?
To increase stock price hugely within small period promoters give some share holdings as well money to Operator. Then operation Pump (Price Increase) begins. Operators give information about the deal to his group of Brokers and sub brokers. These people start trading in that particular company stock with big block orders at Certain Time on Certain Exchange at Certain Price. The Insider peoples in the company getting hint about the deal and they start buying their own companies shares. Technical analyst watch the stock and give Buy call because price and volume in the share increasing drastically. Now the small Retail Traders and Investors who rely on Broker, sub broker, Technical analyst begins buying this share.
Now Fundamental analyst turns come in. Operator “Deal” with some fundamental analyst and they start telling from various media that this share is Hidden Gem and Future Multibagger. They give buy call on this share. Now Companies CFO comes ahead and gives assurance of company’s future growth.
At last some “Incentive” given to Mutual Fund managers and FII to buy this share. Now share price start flying like a rocket and start getting upper circuit. Some Banks approved this share in their list and lend money on this share.
The cunning Operator watches this game carefully. When the Price Target fixed in the deal completes The cunning Operator (Manipulator) and company promoters behind all this operation start selling their shares slowly and steadily,. This is called Operation Dump (price decrease)
Now as share price start continuous falling, Technical analyst gives Sell call on this share. Day traders stop loss start triggered, banks who lend money on this share start Margin call. As share start hugely falling hence there is Panic in the market and share price getting lower circuit or listed in the Trade to Trade group. After some days company get Delist from the stock exchange. The cunning operator and promoters celebrates Diwali :lol: and small retail traders Diwala!
Conclusion:
Small retail traders should stay away from investing or trading in the Small Cap, Mid Cap companies whose More and Real information is not available. Retail Investor should invest in Blue Chip companies after studying that company and Invest for Long Term. Especially with SIP.
P.S. Market Manipulation is up 37% in the last decade, According to U.S. Securities and Exchange Commission (SEC).
Thanks
"The stock market is filled with individuals who know the price of everything, but the value of nothing."- Philip Arthur Fisher
