The high close strategy, in a nutshell
Manipulators are everywhere. In fact, we can also encounter some in trading. Other people have this manipulating strategy called the “high close.” Here, small trades will be made on the final minutes of the trade so that the stock seems like an excellent investment. It will look like the stock performed exceptionally, even if it is the opposite in reality.
The close in the “high close”
In every trade, the close is significant because many traders follow it. Hence, some traders can manipulate the way it looks. We call this manipulation “high close,” and it is pretty common with micro-cap stocks. Micro-cap stocks are from the US publicly traded companies with market capitalization between more or less $50 and $300 million. They have limited liquidity because only a few dollars are needed to increase the price.
Any derivative can get a basis on the stock derivative price, and this price can be inflated with high closing. High close is also involved in mutual fund net asset values. They use a high close in the calculation.
As its name suggests, the high close strategy is only used by manipulating traders towards the end of a financial market’s trading session. Think about the final trade’s price. Its closing price is the one before the trading session’s close. Furthermore, these are the prices used when making traditional line stock charts and even calculating moving averages.
The high close season
Manipulating traders usually get in the action as the month or the quarter ends. They grab the opportunity to manipulate if the stocks have limited liquidity and massive information asymmetry. Information asymmetry is also famous as information failure.
Stock manipulations and high close strategy
If you encounter terms like price manipulation, market manipulation, or manipulation in trading, these terms are synonymous with stock manipulation. Stock manipulation is when a person inflates or deflates a security price artificially. When we say artificially, we mean that it was done on purpose and not naturally. Under stock manipulation, we have the high close. These are prohibited. These traders take illegal actions for personal gain even when they leave innocent victims penniless. However, manipulators are very careful. It is a challenge to detect them because the regulation is not enough.
The easiest manipulate are the stock share prices from the smaller companies. For instance, penny stocks are the usual targets compared to mid-cap and huge-cap companies.
Beware of manipulators
As a trader, you should be vigilant. Do not get into trouble for believing in schemes like high close. Aside from the high close, other famous manipulations include pump and dump and poop and scoop, and inverse poop and scoop. Pump and sump manipulation is one of the most famous, if not the most famous manipulation, where there is artificial inflation in the micro-cap stock. Then, the manipulator will sell out. So, the later followers are the ones holding the bag. Beware of these so you won’t have to lose your hard-earned money.