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  • Writer's pictureraytraceventures

Stock Market is Rigged !

"As soon as I buy the stock, it starts crashing." "Next moment, I sell it and it starts going up." "Operators hunted retail traders' stop loss." "Stock market is rigged." Do these statements come to your mind every time you loose money in the stock market? And you finally conclude that it is nearly impossible to make money in the stock market. Stock market is full of chaos, may be it is rigged but it can be navigated with right education without causing any harm to your capital with the set of rules that you can define for your trading and investing style. These set of rules will help you protect your capital in darkest of hours. We are going to review two of my trades where I broke my rules, got burned and for a moment started to think that stock market is rigged. But then a counter thought took over, was not it rigged when I was making gains? If we loose money -> stock market is rigged If we gain money -> stock market is money making machine If these thoughts swing by your brain during your trading journey then you have a long way to go to win over your emotions. To control vigorous emotional swing highs and lows is a constant journey so don't rush to it rather build bullet proof processes. We will talk more about it in later blogs but in this blog let's review those trades. In addition, we have a special guest motivating our traders and readers in the below section.

Trade in ABB India Let's stalk the technical chart (Fig-1) a bit. The price was facing resistance multiple times and was sticking to the resistance level. This stickiness is important, such setups have high probability of successful breakouts. Near 50-day Moving Average it created a tight range of 10 days (the blue shaded area). For the exact entry point and stop loss level you can refer the scribbled chart. Entry was at 4820 with 100 shares and initial stop loss was set at 4665 which is 3.1% of the capital deployed in this trade.

Fig-1: ABB India

What happened next? The price moved against our expected direction and it hit our stop loss level. Ideally at this moment we should be exiting the trade and sit out. But here emotions played their role and the losing trade was held for one more day. Next day (exit candle) the price sharply moved downwards, I panicked and finally exited at 4449. So, a trade where I was supposed to loose only 3.1% of the deployed capital costed me 7.7% of that capital. Clearly emotions played out their role and then fear completely took over the judgement. This was an example of poor trade management. I broke my rules and I'm not very proud of it. After the continuous fall for 4 days, it started creating a tight range near 200-day Moving Average which again created a nice setup and from there it just shot up like a rocket. Can we say that the stock market is rigged? May be yes or may be not. But as I mentioned, even if it is, our bullet proof set of rules to trade will protect our mental peace and capital in the stock market. So, no matter what we should stick to our rules unlike what I did. Tradebook log- ABB India

Fig-2: Tradebook Log ABB India

P&L Statement

Fig-3: ABB India Trade P&L

Let's us understand this with an example of another trade. Trade in KEI

As you roll your eyes on the left hand side you can se a range of 10 days where price was in tight consolidation. My entry was made on an inside candle day in anticipation of a breakout. The next day price fell and started trading near my stop loss level. As per the initial stop loss, a loss was booked at 3207 exiting all 100 quantities. It was a loss of 2.7% on the capital deployed in this trade. In the next few days price bounced back and again fell violently (candles marked with three red arrows), and presently it has recovered and trading near all time high. I can not surely say if it has been manipulated by big players to gain liquidity to fill their orders. But one thing I can certainly do and that is, sticking to my rules no matter what. Because nobody can predict in how much time the price will bounce back or will it ever bounce back to the same level or not. Keeping this kind of mindset prepares me to trade with large capital.

Fig-4: KEI Chart

Fig-5: Tradebook Log KEI

Fig-6: KEI P&L Statement

On the closing note, I would like you to be comfortable with the fact that even if stock market is rigged you can still make profit by following the right strategy, discipline, optimistic mindset and risk management. This was also an opportunity for me to show you that losses are part and parcel of this business. if you have been the chap who repented for not scoring a perfect 100 in examination then you will find it hard to accept the fact that in stock market you may have to be right 50-60% of the times and still you can make big. Many legendary investors were correct even less than 40% of the times. This brings us to the closure of today's blog. I hope you enjoyed reading it as much as I enjoyed writing it. Thank you for your time ! You can connect with me over LinkedIn and X(Twitter). I'm a student for life, so don't hesitate to send over your views or sources to help me enlighten myself.  You can also subscribe to our weekly newsletter(to be launched soon) and know the pulse of Indian and US stock market and remain ahead in generating Return on Investment(ROI) by reading our weekly while sipping your Sunday morning coffee.

If you are a beginner and want to learn how I do what I do. The below series of blogs will help, to be read in chronological order:

If you are new to investing or trading and looking to open your DEMAT account then may I suggest to open it with Dhan (with my referral)? They have a very cool platform built by prioritizing the needs of an investor and a trader. You can choose to invest from short term to long term in stocks, mutual funds, ETFs and F&O.

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