Market Tactics and Manipulation
Sophisticated market participants can use a variety of tools, tactics, and advantages to profit by achieving short-term or long-term market outcomes
- Market tactics are legitimate profit-seeking behaviors based on research, interpretation, risk-taking, and transparent trading
- Market manipulation consists of illegal profit-seeking behaviors through deliberate attempts to distort prices or market signals through deception
- Some market participants engage in profitable market manipulation using sophisticated tactics that evade detection
In economics and finance, market manipulation occurs when someone intentionally alters the supply or demand of a security to influence its price. This can involve spreading misleading information, executing misleading trades, or manipulating quotes and prices.
Market manipulation is illegal in most jurisdictions. It continues to happen systemically because it is lucrative, and it is difficult to detect and enforce because of increasingly complex and sophisticated methods.
In December 2006, Jim Cramer gave an interview with Aaron Task, in which he candidly describes how hedge fund managers can influence short-term market prices and sentiment to benefit financially.
Cramer describes how a hedge fund can create false market signals to mislead other market participants, how to use misinformation and rumours to create a narrative from which to profit, among other related tactics.
Cramer acknowledges that this behavior is not strictly legal, but it is done anyways because it is lucrative and because the SEC is impotent.
What’s important when you’re in that hedge fund mode is to not do anything remotely truthful. Because the truth is so against your view, that it’s important to create a new truth, to develop a fiction.
In a 2023 Mad Money segment, Nathan from Florida asked Jim: "You're pretty adamant that crypto is a big scam, it's all rigged, but as we saw with GameStop back a few years ago, big firms have the power to shut down trading if they're losing money, like when Robinhood got shut down, how is that less rigged than crypto?"
Cramer admitted that "it was totally rigged."
It was totally rigged. It's okay. It was rigged. I called it out. In one of those movies I called it out. I don't want any touching that. I like great American stories. I don't like the hokum."
In an episode of The Problem with Jon Stewart from March 2022, Jon discusses some of the modern issues with the stock market, particularly with respect to the GameStop episode of 2021.
He argues that despite zero commissions, easy access, and massive retail participation, inequality has increased because the system is structurally designed to extract value from small investors. Central to this critique is payment for order flow, opaque market practices like dark pools, and conflicts of interest between brokers, market makers, hedge funds, and regulators.
Jon generally concludes that the stock market is structured to appear open while remaining rigged. "Democratization" has increased participation, not fairness; real accountability, transparency, and reform are absent.
