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What happens when a Market is Manipulated?

Updated: Feb 14, 2023

Markets can be manipulated in various ways, including spreading false rumors, insider trading, and fraudulent practices. When the market is manipulated, the "herd" or misinformed traders are persuaded to buy or sell. And because everyone else is doing it, they follow suit. However, following the herd in such situations is usually a mistake as it can lead to significant losses. The end result is that most traders lose money. The good news is that there is a way to trade through manipulated markets - by following the smart money legally and effectively.

Why Following the Herd is the Wrong Choice

When a market is manipulated, it is almost always the wrong time to be following the herd. Here's why:

  1. Misinformation: Misinformed traders often buy or sell based on false information or rumors. These traders do not have any real knowledge or insight into the market conditions, which makes them vulnerable to manipulation.

  2. Manipulation: Manipulators can artificially create demand or supply, which can lead to sudden price changes. As a result, the "herd" follows the trend, leading to further price changes. These fluctuations are short-lived, and prices often return to their original levels, leaving traders with losses.

  3. Emotional decisions: Following the herd is an emotional decision. Traders are influenced by the emotions of others, leading to impulsive decisions that are not based on market fundamentals.

Following Smart Money

Smart money refers to investors or traders who have real knowledge and insights into the market. They are well-informed and well-connected and have a better understanding of the market conditions. Following smart money is a legal and effective way to trade through manipulated markets.

FAQs

Q: Can following smart money protect me from market manipulation? A: Following smart money can help you avoid falling prey to market manipulation. Smart money traders are usually aware of market conditions and are less likely to be influenced by false information or rumors.

Q: Is it legal to follow smart money? A: Following smart money is legal as long as you are not using any insider information to make trading decisions.

Q: What are the benefits of following smart money? A: Following smart money can help you make better trading decisions and increase your chances of success in the market.

Conclusion

Manipulated markets can be tricky to navigate. However, by following smart money, you can make better trading decisions and avoid significant losses. Following smart money is a legal and effective way to trade through manipulated markets. Don't fall prey to herd mentality - be smart and trade smartly.








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U.S. GOVERNMENT REQUIRED NOTICE CFTC RULE 4.41 – These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or-over-compensated for the impact, if any, of certain market factors, such as liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.ast performance is not necessarily indicative of future results. Hypothetical performance results may have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

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