Manipulation

What is 'Manipulation'

Manipulation is the act of artificially inflating or deflating the price of a security. In most cases, manipulation is illegal. It is much easier to manipulate the share price of smaller companies, such as penny stocks, because they are not as closely watched by analysts as the medium- and large-sized firms.

Also known as "price manipulation."

BREAKING DOWN 'Manipulation'

One way people can deflate the price of a security is by placing hundreds of small orders at a significantly lower price than the one at which it has been trading. This gives investors the impression that there is something wrong with the company, so they sell, pushing the prices even lower. Another example of manipulation would be to place simultaneous buy and sell orders through different brokers that cancel each other out but give the perception, because of the higher volume, that there is increased interest in the security.

RELATED TERMS
  1. High Close

    A tactic used by stock manipulators; they make small trades at ...
  2. Market Power

    A company's ability to manipulate price by influencing an item's ...
  3. Earnings Management

    The use of accounting techniques to produce financial reports ...
  4. Deflation

    A general decline in prices, often caused by a reduction in the ...
  5. Corner

    1. The act of securing enough controlling interest or ownership ...
  6. Daily Trading Limit

    The maximum gain or loss on a derivative contract, such as options ...
Related Articles
  1. Investing Basics

    How Financial Statements Are Manipulated

    Financial statement manipulation is an ongoing problem, and investors who buy stocks or bonds should be aware of its signs and implications.
  2. Markets

    Financial Statement Manipulation An Ever-Present Problem For Investors

    The SEC has taken steps to eliminate this type of corporate fraud, but it remains a real risk for investors.
  3. Investing

    Quantitative Easing vs. Currency Manipulation

    In theory, quantitative easing and currency manipulation aren't the same thing, but it's much more difficult to tell one from the other in practice.
  4. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  5. Active Trading Fundamentals

    The Short and Distort: Stock Manipulation in a Bear Market

    High-quality stock reports needn't be confused with stock manipulators' dramatic claims.
  6. Fundamental Analysis

    Spotting Creative Accounting On The Balance Sheet

    Companies have ways of manipulating their balance sheets that investors should be aware of.
  7. Active Trading Fundamentals

    Short Selling: Ethics And The Role Of Short Selling

    It's safe to say that short sellers aren't the most popular people on Wall Street. Many investors see short selling as "un-American" and "betting against the home team" ...
  8. Trading Strategies

    Who Actually Trades or Invests In Penny Stocks?

    Although penny stocks are highly speculative, millions of people trade them daily. Here are 10 different types who do.
  9. Investing Basics

    Spotting Sharks Among Penny Stocks

    To protect yourself from an attack, don't swim in this ocean.
  10. Markets

    Earnings Quality: Introduction

    By Tim Keefe,CFA (Contact Author | Biography)The following classic Wall Street joke plays to a risk that many investors don't know how to measure: A company is going through the interview process ...
RELATED FAQS
  1. Do traders, market makers, specialists or others ever deliberately drive a stock's ...

    Many individual investors have had the experience of closing their position in a stock only to see the price rebound moments ... Read Answer >>
  2. Why is overhead cost allocation sometimes manipulated on an income statement?

    Learn why companies sometimes manipulate overhead costs to boost the appearance of overall profitability, and other reasons ... Read Answer >>
  3. Is it more beneficial to invest in a blue chip stock or a penny stock?

    Learn more about penny and blue-chip stocks, why it may be a bad idea to invest in penny stocks and why blue-chip stocks ... Read Answer >>
  4. What are the risks involved with investing in a penny stock?

    Learn more about penny stocks, the risks associated with investing in penny stocks and why it may not be a good idea to invest ... Read Answer >>
  5. Do hedge funds manipulate stock prices?

    Learn how authors of a 2012 study say they found evidence of manipulation of stocks by hedge funds on the last trading day ... Read Answer >>
  6. What is the difference between wash trading and insider trading?

    Explore the differences between two trading practices, wash trading and insider trading, and find out why these practices ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center