- PPF Points
- 2,039
Large market players who are institutional traders owing to their big money and some tools available to them, can easily use not very direct ways of changing the market to their favor and most of the retail traders are not able to see it. The imprint of a large hand on the market is obvious, which is referred to as stop hunting. This is when they intentionally push the prices to the stop-loss levels known to them, which are typically the areas just beyond support or resistance, thus making retail traders come out of their positions and then turn the market back to their advantage within a few moments. Another not so direct method is spoofing, which is the placing of buy or sell orders that are not real to indicate an opposite market sentiment; once the market reacts, these orders are canceled, and the institutions trade in the opposite direction. They also use layering, where they put multiple fake orders at different price levels and pretend the traders are responding with large volume; however, the illusion of huge buyer/seller interest is faked. In the process, these methods reshuffle the prices and disorient the traders, who heavily rely on the data from the order book. Moreover, institutions frequently carry out the practice of breaking down large trades into smaller units employing algorithms so that their trading activities can still be hidden and not be very visible to the market participants, called iceberg orders. They may also carry out wash sales, that is, buy a financial product and then sell the same product at the same or different price, to exaggerate the trading volume and induce others to trade side by side in the market. The major complication arises from the fact that these actions are normally conducted in regulatory grey areas, and they are thus difficult to control but the outcome does not change: retail traders are the ones left affected by the market, which is being very subtly maneuvered by the large players who are in the background.
