trading a zero sum game?

seems like it is to me. ive read many complaints about hedge funds and the "bear raids" that they pull off. take two hedge funds. hedge fund 1 executes a bunch of short sales on a thinly traded stock swamping buyers. it seems like a bigger hedge fund i.e. hedge fund 2 could simply start buyin the stock drivin up the price. i guess hedge funds could start colluding agreeing to stay out of each others stocks. dont know if such activity i.e. colluding is within the rules.

Pretty tough to do. It would be illegal to collude for one and two SEC would take a big look into any kind of activity like this. Remember thinly traded stocks are tough to get shares to short on and the added disincentive is that thinly traded stocks are mostly populated with insiders, family ownership, and long term holders. They will pay little attention to any machinations of the market players. Most of the games you could play both ways and manipulate are widely traded stocks that have lots of liquidity, stocks that institutional players and speculators will play on precisely because they can get in and out easily with little transactional risk or cost. These also are the stocks you could do something with collusion wise because large blocks of trades won't raise any eyebrows. I think the only way you could really do damage with is what you have seen where brokers or even con-men hype up a small stock and then do all kinds of damage to the suckers that buy into it. That clearly is illegal and very heavily punished. Just remember even little guys get caught for insider type deals these days. I knew someone that worked in accounting for a company. He told a buddy he had only known for 6 months that the stock was going to have a nice earnings release. The friend buys 100 calls and makes about $23,000 in a week. The friend has no official ties to the company, but the SEC enforcement found it so unlikely since it was a strange move for him to make and since he lived in the city of its financial headquarters. They started to suspect something since 100 calls was a large block for this particular company. In other words they put it all together and figured out he almost had to have heard something. In the end his fine was giving back all $23,000 plus a $5,000 fine and a stern warning. Now if just a small online investor gets caught for something as small as that, you don't think the SEC would figure out when hedge funds were up to no good?