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October P/L Challenge: Trick or trade — your secret ingredient of trading discipline
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How Manipulators Paint the Charts

1. Creating False Trends

Manipulators buy or sell in a way that creates the appearance of an upward or downward trend on a chart.

Example: Gradually increasing the stock price (laddering) to form a pattern that looks like a steady uptrend.

2. Triggering Breakouts and Breakdowns

Manipulators push prices above resistance levels or below support levels to make the chart appear as if a breakout or breakdown has occurred.

This tricks technical traders into entering positions based on these false signals.

3. Forming Technical Patterns

They execute trades to mimic common patterns, such as head-and-shoulders, double bottoms, or cup-and-handle formations, to bait traders into buying or selling.

4. Candlestick Manipulation

Manipulators control the open, high, low, and close of a stock during specific time frames to create misleading candlestick patterns.

Example: Making a stock close at a daily high to form a "bullish engulfing" candlestick, which signals strength to chart-watchers.

5. Volume Manipulation

Adding fake volume at key price points to make a chart appear more active or to confirm a false breakout.

6. End-of-Day Price Manipulation

Manipulators drive the price up or down near the close of the market to influence the daily candlestick or line chart, making the stock appear stronger or weaker than it really is.

Why Painting the Charts Works

Many traders rely on technical analysis to make decisions, interpreting patterns, trends, and volume as signs of where the stock is heading. Manipulators exploit this by creating fake patterns or signals on the charts to lure traders into buying or selling at manipulated prices.

By painting the charts, manipulators set a trap for traders who act on these signals, allowing the manipulators to profit when the price inevitably reverses. For example:

In a bull trap, manipulators push the price up to form a breakout, prompting traders to buy, only to sell off their shares and cause the price to fall.

In a bear trap, they drive the price down to trigger panic selling, then buy the shares at lower prices before the price rebounds.

How to Spot Chart Manipulation

1. Sudden and Unusual Price Movements: Be wary of sharp price changes without news or other catalysts.

2. Volume Mismatches: If a breakout or trend doesn’t have corresponding high volume, it might be fake.

3. Key Levels Reversing Quickly: If a price breaks resistance or support but immediately reverses, it could be a trap.

4. Repeated Patterns: Seeing the same technical pattern repeatedly in a short timeframe can indicate manipulation.
Tickers where this type of manipulation may have taken place:
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