Understanding Operators Trap in Stock Market

Understanding Operators Trap in Stock Market

Introduction:

Understanding Operators Trap in Stock Market: Stock market operators are individuals who play an important role in trading, just like machine operators do in other industries. If you have been trading in the stock market for any amount of time, you must have encountered stock operators. It is crucial for traders to understand the impact of operators because without experiencing their influence, one cannot truly become a successful trader.

Regardless of how much you learn about candlestick patterns, chart patterns, various indicators, or option chain analysis, all that knowledge becomes meaningless when an operator enters the game. Nothing works when an operator is present. Do you know “who operators are and what they do?” Let me explain.

Operators Trap in Stock Market
Who are Stock Market Operators?

Who are Stock Market Operators?

Stock market operators are individuals or entities who manipulate the stock market. They control the normal flow of prices in the market, creating artificial movements that deviate from the natural flow. They manipulate the prices of shares, making it difficult for traders to profit using their usual strategies. Operators can affect both large stocks and small stocks, but manipulating large stocks requires entering the futures and options market.

Types of Stock Market Players:

In the stock market, there are four main types of players:

1. Proprietary traders:

These are individuals who have a trading account with a broker. They play an important role in the market.

2. DIIs (Domestic Institutional Investors): 

These are large institutional investors, such as mutual fund companies, that have a substantial presence in the domestic market.

3. FIIs (Foreign Institutional Investors):

These are foreign companies that actively participate in the Indian stock market.

4. Retail traders:

These are small traders like you and me, who have entered the market as retail investors.

The Role of Stock Market Operators:

Stock market operators, being the most powerful players, have the ability to manipulate the market according to their own strategies. They have the financial strength to manipulate stocks, creating artificial breakouts and breakdowns.

They take advantage of retail traders, inability to accurately analyze the market and use this to their advantage. They can cause false breakouts and breakdowns, tricking retail traders into taking positions that eventually result in losses. Operators have the power to turn the market in their favor and take profits from retail traders.

How to Trade on Support and Resistance by using Operator Mindset
Importance of Support and Resistance Levels

The Importance of Support and Resistance Levels:

Support and resistance levels play a crucial role in trading because they offer a high level of accuracy. Traders often base their trades on these levels. When a price touches a support level, two things can happen: the price can either bounce back or break down.

Similarly, when a price approaches a resistance level, it can either bounce back or break out. Operators understand the significance of these levels and use them to their advantage. They manipulate the market to touch support or resistance levels, causing retail traders to either get stopped out or take positions, resulting in losses for them.

Operators Trap in Stock Market
False Breakouts and Breakdowns

False Breakouts and Breakdowns (Operators Trap in Stock Market):

False breakouts and breakdowns occur when prices touch support or resistance levels but then reverse, going in the opposite direction. This false movement is created by operators to trap retail traders. When prices break support, retail traders start shorting the trade, expecting it to go down further.

However, the prices then reverse, resulting in losses for the retail traders who took short positions. Similarly, when prices break resistance, retail traders start buying the trade, expecting it to go up further. But again, the prices reverse, causing losses for those who took long positions. Operators take advantage of the trust retail traders place in support and resistance levels and manipulate the market accordingly.

Conclusion:

Regardless of the knowledge and skills retail traders acquire in the stock market, they cannot succeed without understanding the game played by operators. Operators have the power to manipulate the market and take advantage of retail traders, lack of experience and analytical capabilities. To protect your hard-earned money and succeed in trading, it is essential to understand the strategies employed by operators and be able to identify false breakouts and breakdowns. Developing a deep understanding of support and resistance levels and observing market behaviors can help retail traders avoid falling into the traps set by operators.

I recommend reading to this book titled “Reminiscences of a Stock Operator” It features several good books related to the stock market that can help you gain valuable insights and enhance your financial knowledge. Before delving into investing, it is important to educate yourself about both the financial and the express aspects of trading.

People also Ask Question | FAQ:

1. How do you understand the operator game in the stock market?

Ans: Operators are market participants who possess the capacity to change the price movement/market direction with extensive buying or selling.

2. How do operators manipulate stock market?

Ans: They use a technique called circular trading.

3. Can operators manipulate index?

Ans: Operators never indulged in such heavy volume stocks, leaving aside index for manipulation.

4. Are stock market operators real?

Ans: Large-scale stock market investors or traders are known as stock operators.

5. Who controls stock exchange operations?

Ans: Securities Exchange Board of India (SEBI).

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