Apart from the stock picks, today we are discussing about one of the most important aspects of the stock market. i.e CIRCUIT FILTERS. Most of the time Stocks hit Up or Down circuits because of the so called Operators/ Manipulators.( Not always but most of the Stocks/ Operator driven). Now we will see how these happens in the stock market.
Take one example of share scrip ABC, operators are following this scrip at the early stages and starts accumulating for a considerable time. They will be having more than one accounts to do the this activity. At the same time they will have a close connections with the promoters, major shareholders, HNI etc.
At the initial stage, they will buy & sell the shares of ABC in to their accounts only to create the artificial volumes, in addition to it with the help of these promoters they will publish news driven/ important announcements/ sentiment driven news to Stock exchanges. By this time they will be having good amount of shares in their account . Once they finish accumulating the shares, they will put big order to make it up circuit. Please read carefully what happens next.
Lets say ABC share has hit with upper circuit with 100000 shares, this is the time actually retail investors will rush in for this scrip, they also puts an open orders for the same. Assume now the total order say 110000. (10000 from retailers & 1 Lakh from Operators). Now they will change the order to say 100001, total order quantity will become 110001- as you know in market once you change the order it will be executed after executing the previous order. Now they will sell 10000 shares to retailers & this process will continue for many days. PLEASE NOTE THAT OPERATORS ARE ACTUAL SELLERS IN THE UPPER CIRCUIT.
Once they will finish selling all their accumulated shares they will cancel the buying orders, naturally ABC stock will slide to lower circuit. At the end of the process Operators are sitting with the money & poor retailers are with stocks in their hand. (In some cases they will buy small quantity of the shares at each down circuits and once they finish buying they will put again big orders to make it again upper circuit and they will repeat the process or they will leave the counter).
Dear friends , once again please hammer this words in your mind that OPERATORS ARE ACTUAL SELLERS IN THE UPPER CIRCUIT, RETAILERS ARE THE BUYERS.
So dear readers don't fascinating about the Upper circuits and chase the stocks blindly, finally you will be ending up burning your hands.
This blog is to create the awareness in the investors about the CIRCUIT FILTERS.