Market manipulation can happen in several ways, particularly with low-priced and low-volume stocks which are more susceptible due to their limited market activity. Here are some common manipulative tactics:
Pump and Dump Schemes: In these schemes, manipulators artificially inflate a stock's price by spreading positive rumors or conducting coordinated buying activity. Once the price reaches a peak, they sell off their holdings, causing the stock price to plummet and leaving unsuspecting investors with substantial losses.
Wash Trading: This involves manipulators creating an illusion of substantial trading activity by buying and selling the same security among themselves. This false activity can mislead investors into believing there is significant market interest in the stock, potentially influencing their investment decisions.
Ramping and Momentum Ignition: This tactic involves manipulators using aggressive buying or selling strategies, often with large order sizes irrespective of the stock's intrinsic value, to create rapid price movements. This manipulative practice can generate artificial movement in a stock's price.
Layering and Spoofing: In layering, manipulators place multiple orders at different price levels to create artificial buying or selling pressure. In spoofing, large orders are placed with no intention of executing them, aiming to distort market signals.
Investors should be aware of these tactics when trading in low-priced and low-volume stocks. It's crucial to conduct thorough research and be skeptical of unusually rapid price movements or sudden increases in trading volume