What Is Manipulation?
Market manipulation is conduct designed to deceive investors by controlling or artificially affecting the price of securities. Manipulation is illegal in most cases, but it can be difficult for regulators and other authorities to detect and prove.
Market manipulation may involve factually false statements as well, but it always seeks to influence prices in order to mislead other market participants.
Key Takeaways
- Market manipulation aims to mislead other market participants.
- Manipulation is hard to detect and prove, but it's also harder to execute in the larger and more liquid markets.
- Two common types of stock manipulation are the pump-and-dump and the poop-and-scoop.
- Currency manipulation is a distinct political claim typically made in trade disputes between sovereign countries.
Manipulation Methods
Manipulation is more difficult for the more liquid, or widely traded securities. It is much easier to manipulate a penny stock with a tiny typical daily trading volume than the share price of a large-cap company with daily turnover valued in billions of dollars.
The pump-and-dump is a market manipulation often used to artificially inflate the price of a microcap stock before selling it. Less common is the inverse poop-and-scoop scheme, in which false derogatory statements are made about a stock in order to buy it on the cheap. There's also the short-and-distort variety, essentially a poop-and-scoop executed by short-sellers in order to profit.
While such schemes rely primarily on promotion or factual misstatements they are often supplemented by illegal trading tactics designed to deceive.
One common means is order spoofing, which involves the placing of numerous buy or sell orders designed to move the price of the stock, then canceling them once other traders have moved their own bids or asks accordingly. Order spoofing has tempted staff at large Wall Street firms alongside shady daytraders, and can take place in the bond and metals markets as well as in the stock market.
Currency Manipulation
Currency manipulation is an accusation often levied in trade or exchange rate disputes, notably by the U.S. against trading partners who are sometimes alleged to set the exchange rate of their currency against the U.S. dollar artificially low to boost exports. Governments and central banks can be accused of currency manipulation if they fix the exchange rate or seek to affect it less openly with market transactions from time to time.
Currency manipulation is a political term rather than a legal one because foreign exchange policies are set by sovereign countries. Currencies are fixed or allowed to float for a variety of internal and external motives, while currency manipulation claims are almost always the result of dissatisfaction with trade flows. As a result, whether a currency manipulation is taking place or not is often a subjective judgement.
The U.S. Treasury makes a semiannual report to Congress on the macroeconomic and foreign exchange policies of major U.S. trading partners in accordance with the Omnibus Trade and Competitiveness Act of 1988. The report uses evaluation criteria spelled out in the Trade Facilitation and Trade Enforcement Act of 2015. The December 2021 report concluded no major U.S. trading partner manipulated its currency's exchange rate against the U.S. dollar to gain an unfair competitive advantage in international trade, while singling out Vietnam and Taiwan for additional scrutiny.
Currency manipulation is a political claim rather than an illegal market deception.
Example of Currency Manipulation Claim
On August 5, 2019, the People's Bank of China (PBOC) set the Chinese yuan’s daily reference rate above 7 yuan per dollar for the first time in over a decade, depreciating the Chinese currency against the dollar and making Chinese exports cheaper in dollar terms. The rate was set after the announcement by the Trump administration of new tariffs of 10% on $300 billion worth of Chinese imports, which went into effect September 1, 2019.
The same day the yuan exchange rate topped 7 per dollar, the Trump administration labeled China a currency manipulator, a designation lifted a few months later. The tariffs on Chinese exports, however, remained in place as of July 2024.
FAQs
Manipulator uses sarcasm and put-downs to increase fear and self-doubt in the victim. Manipulators use this tactic to make others feel unworthy and therefore defer to them. Manipulators can make one feel ashamed for even daring to challenge them. It is an effective way to foster a sense of inadequacy in the victim.
What is manipulation with an example? ›
Manipulation is the skillful handling, controlling or using of something or someone. Whether it's the sculpture you made in art class or how you convinced your friend to do your homework — both are considered manipulation.
What is the best definition of manipulation? ›
: to control or play upon by artful, unfair, or insidious means especially to one's own advantage. being used and manipulated by the knowing men around him New Republic. 3. : to change by artful or unfair means so as to serve one's purpose : doctor.
What are the different types of manipulation in philosophy? ›
They can be grouped roughly into three main categories: those that characterize manipulation as an influence that bypasses reason; those that treat it as a form of trickery, and those that treat it as a form of pressure. These are rough categories, and a single theory might fit into more than one of them.
How to tell if someone is manipulating you? ›
A few common examples include:
- They try to make you feel guilty. A manipulator can skew any situation to make themselves the victim. ...
- They encourage you to doubt yourself. If you're repeatedly told that you can't do something or don't understand, you may start to believe it. ...
- They complain. ...
- They compare you to others.
Gaslighting
This often shows up as the abuser using common gaslighting phrases like calling you “crazy” or manipulating situations to instill doubt in yourself. A manipulator does this so you eventually automatically trust and do what they say without question, giving them ultimate control.
How does a manipulative person act? ›
Manipulative behavior occurs when a person uses controlling and harmful behaviors to avoid responsibility, conceal their true intentions, or cause doubt and confusion. Manipulation tactics, such as gaslighting, lying, blaming, criticizing, and shaming, can damage a person's psychological well-being.
What is the most common type of manipulation? ›
Be aware of your emotions: Emotional manipulation is the most common form of manipulation, but despite all of the manipulative tactics people may use, your emotions are still your own. Practice being aware of what your emotions are and when they change (and if it is in response to a manipulative tactic or not).
What is an example of being emotionally manipulative? ›
They use your feelings against you
If you're upset, someone who is manipulating you may try to make you feel guilty for your feelings. They may accuse you of being unreasonable or not being adequately invested. For example: “If you really loved me, you'd never question me.”
What is the best definition of manipulative? ›
influencing or attempting to influence the behavior or emotions of others for one's own purposes: a manipulative boss. of or relating to manipulation of objects or parts of the body; serving to manipulate: spinal manipulative therapy.
Manipulative people use deception, coercion and trickery to get what they want and to maintain power in relationships. You can deal with them by identifying the weaknesses you have that they might prey on, and by spotting manipulative behaviors.
How do you handle a manipulative person? ›
Seek clarity rather than confrontation: When you sense manipulation at play, ask them to explain their behavior or statements peacefully. Use “I” statements: Own your feelings. Stay factual: Keep it real, ditch the drama. Avoid playing the blame game: Express how their behavior affects you without attacking them.
How to outsmart a manipulator? ›
8 Ways To Deal With Manipulators
- Ignore everything they do and say. ...
- Hit their center of gravity. ...
- Trust your judgment. ...
- Try not to fit in. ...
- Stop compromising. ...
- Never ask for permission. ...
- Create a greater sense of purpose. ...
- Take responsibility for yourself.
“For example, those with antisocial personality disorder may come across as very charming, but their goal may be to have control or harm you,” he says. Some signs of a manipulative person may include: persistent excessive attention, love, and flattery. persistence despite boundaries.
What is the best manipulation technique? ›
While manipulative tendencies are often subtle and sometimes undetectable, there are four stages of manipulation.
- Flattery. The first stage is when the person who manipulates puts on a facade of being kind, caring, and helpful. ...
- Isolation. ...
- Devaluing and gaslighting. ...
- Fear or violence.
During a disagreement or fight, a manipulative person will make dramatic statements that are meant to put you in a difficult spot. They'll target emotional weaknesses with inflammatory statements in order to elicit an apology. For example: “If you leave me, I don't deserve to live.”
What are the tactics of a manipulator? ›
Manipulation tactics, such as gaslighting, lying, blaming, criticizing, and shaming, can damage a person's psychological well-being. These behaviors are common and can occur in platonic, romantic, familial, and professional relationships. Knowing how to identify them can help.
How do manipulators choose their victims? ›
Manipulators tend to target those who are vulnerable in some way. Sadly, manipulators tend to prey on those who are good-hearted, trusting, weak, or naive. It's regrettable that manipulators seem to have a sixth sense, and they choose to use that sixth sense to be damaging and self-serving.
