Information Bomb

Knowledge is power? I say "Information" is. And when you try to pay even little regard to the Lemons Principle and realize that information asymmetry is real, you accept that its a potential time bomb in the hands of the right kind of person.

Markets work on a simple fundamental that price differences give an opportunity to buy low and sell high or short the difference. This price difference is due to imperfect information dissemination, which can be for the company or the stock's intrinsic worth. But can the price difference be conditioned?

Have you ever asked yourself a question that how do traders take money in C category stocks? These aren't the kind of companies that would bang the next innovation so why trade in them? That's because smaller volumes when pushed to a certain direction (Buy or Sell) by a person or a group of people with a chunk of the holding, can condition the stock to shoot up or decline artificially. This is because of simple math. The promoters and traders who have chunk holdings, make the money and get out while the retail investors get stuck. Besides this, channelized information, if done through the right people can scare you into selling a stock or mislead you into buying one.

So the next time someone tells you something about a company's stock, do the following:

Go to at least 3 financial websites to check the news
Ask a second or a third broker and verify the information
Check the financials of the company