Momentum Ignition

The trader buys or sells quickly and in size, sometimes setting off stop orders or algorithmic strategies that follow trends, and creates a sudden jump or drop. Other participants read the move as a signal and pile in. The trader, who built an opposite position earlier, exits into the extra activity at better prices. It can be combined with false rumours. Because the conduct looks much like aggressive but lawful trading, supervisors look for evidence of intent: the trader’s earlier positions, the timing of orders relative to the move and any losses accepted at the start. High-speed trading raised concern, and regulators in several regions name the tactic as an example of manipulative behaviour. Surveillance models search for bursts followed by reversals. Retail investors who follow the trend end up buying from the person who started it.

Ahead of her move, a trader buys a modest holding in a thinly traded share. She then sends rapid buy orders that lift the price 4% in minutes, which triggers trend-following programmes to buy as well. As the price peaks, she sells her holding to the new buyers. Surveillance flags the same pattern across several days.