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A Rollercoaster Ride:
Volatility & Manipulation in the Stock Market

APEF: Solving the Financial Illiteracy Crisis

The stock market really can be exciting, like riding a rollercoaster. Sometimes, stock prices shoot up, making investors happy…but other times, they plummet, leaving everyone feeling a bit nauseous. If you're considering diving into the often temperamental world of investing, you should have an understanding of key concepts like volatility and market manipulation. These two factors can have a big impact on stocks and the stock market overall. Let’s break them down and see how they can affect your investments.


Volatility refers to how rapidly the price of an asset (like stocks or securities) changes. A high amount of volatility means wide and unpredictable price swings while lower volatility indicates steadier and more gradual price changes. There are pros and cons to market volatility. High volatility can present investors with opportunities to buy stocks at lower prices and sell them later at a higher one, potentially yielding significant gains, and watching how stocks react to market events can teach you a lot about investing and market dynamics. However, the same rapid price movements that provide opportunities to make gains can also create risk for losses if the market shifts suddenly in an unexpected direction. Not to mention, investing in volatile markets can be nerve-wracking, especially for new investors who may feel anxious about their money.

What causes this volatility?

There are multiple factors that may contribute to market instability. Positive developments from companies such as a successful product launch can cause stock prices to skyrocket, while negative events like recalls can send it plunging. Strong economies can often result in higher stock prices while recession can bring them tumbling. If investors feel optimistic about the financial climate, they may purchase more stocks, increasing prices. Conversely, when feeling nervous they may sell more and cause prices to decrease. There’s no one singular reason for volatility in the market- and often multiple factors can contribute all at once!

Market Manipulation


  • Market manipulation occurs when individuals or groups use sneaky or unethical practices to artificially influence the price of stocks, potentially disrupting normal market operations and endangering unwitting investors. Let’s take a look at some examples of market manipulation.

  • Manipulators promote a stock with false information to increase the price and then sell off their shares when the price rises, leaving other investors with losses. You’ll sometimes see this referred to as a “pump-and-dump.” Manipulators place large buy or sell orders without intending to execute them, hoping to “spoof” or influence others to buy or sell the stock by making it look more (or less) in demand than it actually is.

So what’s the impact?

Market manipulation can lead to unfair advantages for those who are unethically manipulating the market while harming ordinary investors. It can undermine investor trust in the market, prompting many people to withdraw participation altogether. This is where regulators like the Securities and Exchange Commission (SEC) have to step in to investigate and take action against manipulators to maintain fair and honest markets.

It’s certainly nerve-wracking to know there are people out there who are actively trying to cheat the market (and potentially harm your investments!) but there are ways to protect yourself- before investing in stocks, conduct extensive research. Look for reliable sources of information and be wary of sensationalized reports. Be cautious if you hear unsolicited stock tips promising large gains within a short period, especially ones promising quick profits at no risk to yourself. If something seems too good to be true, it probably is. It’s also a good idea to spread your investments among different asset types to reduce risk. Volatility and market manipulation are crucial concepts to be aware of as you embark on your investment journey. While volatility offers opportunities for gain, it also poses risks. Market manipulation disrupts fair operation of the market, so being knowledgeable about this subject allows you to navigate it more confidently while making wiser investment decisions. As we’ve said before, knowledge is power! 

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