If you play World of Warcraft this is a solid Auction House technique. I find it humorous to see it applied to the 'real' world (not that WoW economics aren't just as 'real').
The ability to push the price down gives informed actors some pricing control on the market, and the subtext is that it allows for folks to push around pricing to understand the elasticity for any product. Now if you can get them to buy a 'put' of your product :-)
I'm not a lawyer, but I've worked in the financial sector and undergone FSA mandated training courses on what you can and can't legally do with equity pricing. What the OP was suggesting is an illegal practice in most equity markets.
The reason it's "liar's poker," not "outright fraud," is that if someone calls your bluff, you lose that hand. The successful traders were just good or lucky enough to be able to bluff the entire market.
> And (from what I understand) this is just the kind of thing that High Frequency Trading algorithms are doing.
In stocks, there's almost always someone willing to buy and someone else willing to sell at any given price, so how are you going to drive the price down without selling stock?
That is the most fascinating myth I continue to hear about the market. As a non-seat owner, you see three prices: The price of the last trade OVER 15 minutes ago, where a buyer and a seller agreed to buy. The highest price someone offered to buy the stock 15 minutes ago, and the lowest price someone offered to sell the stock 15 minutes ago. When you actually buy or sell a stock, you often do not buy from or sell to a long term owner. Instead, the transaction happens with a "market maker" an entity that is a seat owner, knows the current offers right now as opposed to 15 minutes ago, and trades with you. There is almost NEVER a "meeting of the minds" on price between a buyer and a seller. In fact, there does not have to BE a buyer if a market maker decides the value of the stock makes it worth acquiring or selling at your offer price. (If you check "Market" for your offer price, I suggest you read almost anyone who writes about trading, but plug your ears because they start shouting "no" really loudly). So, to finish (sorry about the length of this), a huge or in some cases a simply mis-priced offer to buy or sell may unnerve the market makers. They may hesitate. The lack of quick sales at a given price to the market makers causes repricing by the sellers, which causes the price of the stock to fall. Try pricing a limit bid between the buy and sell price on your electronic brokerage. You'll see. Sometime it will sell right away, and sometimes it won't. If you want to sell right away, you'll drop the price. And, if you happen to find a stock in "free fall", you'll never sell, because the price you see is 15 minutes old.
Please update your facts. Almost every online broker offers real time pricing for US equities and some even provide the depth of book. What you say above (15minute delayed quotes) was true several years ago but things have changed.
not quite. What OP described would not work in automated finance, where once the book approaches $5 an army of computers would try to buy it before him.
The ability to push the price down gives informed actors some pricing control on the market, and the subtext is that it allows for folks to push around pricing to understand the elasticity for any product. Now if you can get them to buy a 'put' of your product :-)