What is "market manipulation"?

Question

What is market manipulation? When we can speak about market manipulation? Can "normal people" with a not so high budget manipulate the market?

Answer 1

Market Manipulation is, in simple terms, using deceptive practices to change the price of something on the market in a way that benefits the deceiver. Many of the schemes are illegal, and many require large resource pools.

However, you don't have to be rich to be a criminal. Probably the simplest way would be "stock bashing," where an individual lies to other shareholders to make a company seem horrible (committing libel/defamation), in the hopes that other shareholders will sell, thus driving down the share price. The criminal might, for example, disseminate the lies on public forums that the shareholders frequent. Once the share price is down in the artificial trough, the criminal buys up whatever shares he/she can, and then awaits the inevitable return of the stock to its former price. When the stock rebounds, the manipulator sells, making a profit (at least until the company pieces together what happened, finds the criminal, and prosecutes for defamation).

Low-budget criminals would mostly have to stick to small companies, as large companies simply have too much inertia for low-budget criminals to affect the price much, unless the criminal has an inordinate amount of influence.

Note that low-budget criminals still couldn't invest much in the scheme, so their profits will be lower, which makes the prospect of prosecution even less attractive. At the end of the day, investing in the stock market legally is a far more profitable deal, especially if one judges one's conscience to be worth anything.