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Dirty Secrets of the Stock Markets

06 Nov 2019

Stocks markets in India are seen on the two extreme edges. While some people think that it is horrible addiction and nothing short of sin equaling gambling, others feel that it is the best place a person could be at to make money and become successful.

There are very few people who understand stock markets as a business and work that is similar to any other profession where ups and downs are a part of the cycle. There are all types of believers and players associated with the stock market who not only let stock markets affect them but also let their thoughts and biases affect the stock market.

This is the real power of stock markets where it’s a give-and-take relationship. The truth is - the stock markets can be manipulated; one just needs to know the right plugs to pull.

The reigns of the markets are in the hands of big brokerage houses who often have a network of smaller houses and analysts who give a call based on the way the big houses want the price to fluctuate.

For Example, if a big broker, say X, wants to profit from a share by driving its prices up, he will ask all his network of smaller brokerage houses to give their clients a recommendation to ‘buy’ that particular stock. As the price moves up due to high demand, the mission of X is accomplished, with there being any material change to cause the particular hike in the stock prices.

Thus, a large fish can immediately change the course of a stock by deploying the right tactics and pulling at the right levers.

Another dirty secret and fact of the market is that Indian stock markets are highly sentiment driven. This means that any rumor or whispers in the corridors can set off a trend in the market. This can cause either profit of loss to a person’s wealth depending on his position in the stock market.

To handle instances such as these, a person can take the following measures:

1. Always take help from a certified financial advisor who generates trading calls based on thorough technical and fundamental analysis of the markets and gives sound reason for giving any advice or stock market recommendation.

2. Buy on rumor, sell on confirmation. Often rumors cause stock markets to shoot up of drop down, any other activity causes a slower change in the markets. If you are anticipating a rise in markets, then you must buy at the rumor and sell when the confirmation comes in. And vice versa in case of a negative rumor.

3. Keep a strict eye on the stories coming out in newspapers and to not trade on their basis straightaway. A person should understand the intent behind the publication of any news regarding a listed company or big group which is likely to affect the stock markets.

Rest depends on your ability to gauge the markets and the mood of the crowd which in India is fairly volatile. The best bet would be to take help from a registered investment advisor who is not connected to any brokerage house and is able to give recommendations purely on the basis of technical and fundamental analysis of the stock markets.

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