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Shorting/Price manipulation explanation

Discussion in 'Beginner's Lounge' started by mcgrath111, Dec 7, 2016.

  1. mcgrath111

    mcgrath111

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    Hi all,

    Hoping someone can provide me a snapshot of how prices can be manipulated/ if they are manipulated by shorting.

    Arent shorts essentially just the opposite of those going long and if a stock is being heavily isnt it based on negative views / results and sentiment.

    I.E vocus...on HC people saying price being manipulates etc.
    Goldman manipulating etc.
    Isnt Goldman within there right to short the stock?..Thats like saying cgf is manipulating by increasing substantial holding isnt it?

    Feel like I'm missing something.

    Sorry about spelling and being brief / writting on my phone during a tea break.

    Thanks!
     
  2. ROE

    ROE

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    They are just short term traders and whingers, if you are a long term investor none of this matter as
    in the long run the stock price will reflect the business cash flow and profit.

    if it get hammer by so called manipulators and shorter and you know your stuff load it up, long term you will be rewarded.

    complaining about shorters, manipulators is just futile and most of this stuff border on conspiracy bull****.
    Learn to manage your risk and your investment and look at each business on its merit and none of that stuff matter.
     
  3. Klogg

    Klogg

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    Your common sense is right - shorting a stock is simply selling it, then buying back at a later price (there's more to it than that, but you get the idea).

    The idea that people are manipulating the share price is ludicrous. I have posted a few times there, but very few respond with anything of substance. Instead it's full of ridiculous comments like "this is the bottom" or "shorters will stop here". Absolutely stupid.

    My advice would be to ignore all that crap.
     
  4. Gringotts Bank

    Gringotts Bank

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    A while back Skyquake posted an article about an Australian fund manager using shorting to push a company's price down illegally. The SP plummeted, and they got pinged for it. I can't find the thread but you can search through his old posts because he's not on here often.

    So it does happen and it is real. Open/closing prices in small companies are often manipulated - very obvious, because buy/sell volumes are manipulated down to 1 share in many cases. Bots scramble in the final seconds to 'create' the price they want, usually matching VWAP (if closing price auction).

    If I'm a fund manager, and I know I'm the only insto in a certain [small] stock, and that everyone else is a LT holder or retail, then I can do whatever the hell I like. I can run stops, push the price wherever I like. I just crowd the depth on both sides and I own everyone. My only competitors are those retail traders who see what I'm doing.
     
  5. Gringotts Bank

    Gringotts Bank

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    I just realized something today. I contribute about 100 times much more to this forum than I take. I must be a fkn idiot. In fact nowadays it's rare that I find any value at all on ASF.
     
  6. mcgrath111

    mcgrath111

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    Cool cool,

    Thanks for the replies, I was thinking that it could be based largely on whinging for the most part, but interesting to see there is manipulation to a certain extent, particulalry in regards to small caps.

    Gringotts, youre not an idiot; but a selfless contdibutor to the asf forums ;)
     
  7. galumay

    galumay learner

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    I am with ROE and klogg on this conspiracy theory nonsense about manipulation and shorters controlling the market. Its all irrelevant, if anything these players in the market simply create opportunity for those with the patience, skill and temperament to assess the underlying value of a business.

    Luckily, most people completely fail to understand the difference between price and value - this misunderstanding causes more opportunity for wealth creation than anything else in any market you care to consider.
     
  8. Wysiwyg

    Wysiwyg Everyone wants money

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    Ask questions of the material you wish to know because most people that post about trading are asking a question, posting their trades or trades of interest. Not so much teaching as people don't reveal too much if they know and obviously don't say when they don't know.
     
  9. minwa

    minwa

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  10. skc

    skc Goldmember

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    Manipulations probably exist to some extent, in many different forms. The definition of manipulation is very broad... anything that generates a reaction in other market participants has been called market manipulation. Most of the times, however, it's people jumping at shadows or simply blaming others for their lack of trading / investing skills.

    Take shorting for example... JB HiFi was for a long time a most heavily shorted stock on the ASX. But that didn't at all impact the company's operations and the stock has maintained a long term uptread for some time. Bellamy on the other hand was also heavily shorted into the recent shock profit downgrade. There will be no shortage of people claiming manipulation by shorters before the profit announcement... but it's pretty certain that the shorters did not have a role in Bellamy's sale and profits falling 40% below consensus. In deed, if someone got "scared" by the shorters and sold before the profit downgrade, they'd be better off. If anything, one would have to say that the analysts who put out $15-20 price targets were the manipulators.

    The bottom line is... if you have the skill in your craft and the conviction in your skill, manipulations (if they exist) will merely enhance the opportunities available to you.

    I have read a few stories on this... Yes he was spoofing the market like he does on every other trading day, but to pin the whole flashcrash on him seems a bit far fetched.

    Quite a few bits on this statement is untrue.
     
  11. galumay

    galumay learner

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    Sometimes less is more!
     
  12. tech/a

    tech/a No Ordinary Duck

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  13. Klogg

    Klogg

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    @Gringotts - You do contribute a lot, and we all thank you for it. But I think you'll find that just by contributing you've also learnt new things or your ideas have at least evolved.

    The idea used for medical interns that is "watch one, do one, teach one" is applicable anywhere. Given you're doing a lot of the teaching part, you can't help but progress from it.


    I'd also imagine that's why Peter2, skc, McLovin, craft, Ves, Value Collector, tech/a and many others are here - because they get something out of teaching others. None of them need to be here.
     
  14. tech/a

    tech/a No Ordinary Duck

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    This shows me its you that's not getting what you need or expect from ASF.

    Perhaps you need to re evaluate.
     
  15. ROE

    ROE

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    To walk the talk, I am currently loading up a stock that is heavily short at a moment
    most of the volume in the last 2 weeks are short, 30-50% of trade volume are short
    and I love it.

    I have 70-100K to allocate and I only currently allocate 30K, I watch the short position the more they pile up
    and drive it down the price I load up in chunk of 15-20K

    I cant predict where it will stop or what the price going to be or when it end
    but what I can reasonbaly sure that 10 years from now
    this stock will be at least 50% higher than what it is today plus dividend to go with it

    so what happen between now and then I dont care go short, manipulate do what they need to do
    I pocket my dividend twice a year and modest capital gain till the day I decided to sell.

    edit: the stock has recovered a bit and now trading more than my average price but I dont want it to, I want more shorters :) I still have more capital to allocate
     
  16. ROE

    ROE

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    I probably too quick with my post due to limited time but I do acknowledge there are shorters and other elements at play that affect the price but the point I want to make it, that only temporary effect the price and none of this will

    have any impact on the underlying business and in the long run as sure as sun rise the price will reflect its profitability and the cash it has and the dividend it throw back to its share holder.

    the people who complains about shorters and whole rafter of other reasons are short term traders in for a quick profit and trade dont go their way or guys that buy and has little knowledge of the business then price went south
    instead of improving on their stock picking and learn from their mistakes they blame everyone else.

    I never ever blame anyone for my short coming, it is I who click the button, it is I who decided to buy without research or speculating :D
     
  17. Gringotts Bank

    Gringotts Bank

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    Excellent advice ROE, thanks. I appreciate everyone else who replied too.
     
  18. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    I agree that heavily shorted stocks can provide great short term opportunities as well. Shorters must be buyers to cover and when they exit the volume spike they create can be trend changing....
     
  19. CanOz

    CanOz Home runs feel good, but base hits pay bills!

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    What an unusual thing to say....
     
  20. BarneyChambers

    BarneyChambers

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    Shorting on a stock is actually illegal/against the rules in some countries as it has the potential to make a stock crash if abused to the extreme!
     
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