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How To Recognize A Stock That’s Being Pumped – AKA Pump & Dump Stocks
Mark T Bird
Publish date: Wed, 21 Mar 2018, 10:03 PM
If you’re a penny stock trader like I am, you’re always looking to see if a stock is a pump before you trade it.
It’s just another way of practicing safety in the stock market.
Yes, you can trade penny stocks that are being pumped, but you have to know first whether or not they’re being pumped.
So many penny stock traders have this problem, or at least are always asking themselves this question. How do I spot the pump and dump stocks?
If you’re beginner I’d not advise you to start up by trading pumps and dumps. I had a very bad experience with them as a beginner.
I wish I was as fortunate as you to have someone advising me not to trade them. But it was not the case, I had to experience it myself and learned from my mistake.
I’ve done ample amount of research before invested, but I did not find any written post telling me not to start with pumps and dumps.
My friends were making money trading them, so I figured why not? I thought it was a very easy and straight forward process.
Even my friends thought the same thing, fortunately for them they were just pure lucky.
From this post, I will share with you 5 key signs that I know on how to spot the penny stocks that are being pumped.
Hopefully they can help you to improve yourself on how you do your day-trading.
First of all, what’s a pump and dump stock?
It’s a stock that’s being promoted by either shareholders or by the company itself. Sometimes they would even have paid promoters promoting them to increase their price.
Why would they want to do this so called “pump and dump?”
It’s pretty simple!
They promote the stock which they currently own some shares from. Once the price has increased to where they would want it, then they sell all the shares.
Those who buy when the price has reached its peak think that they will make profits, but that’s when the price plummets on them, losing them their money.
Promoting the stock is the pump, selling them once the price reaches a reasonable high is the dump. So they call this process “Pump and Dump Scheme.”
Some traders actually take the advantage as those con artists are making their own profits. In order to do this you’d have to know what you’re doing.
That’s why I’d not advise beginners to take this path.
So, how do we spot pump and dump stocks
- 1-Promise of big profits:
Anytime you’re being promised of big profits from a stock you should reconsider. It’s a big red flag because no one really knows when their big profits will come.
We can assume, but we cannot know really for sure of any stock’s outcome.
I do believe you’ve known that by now if you’ve been trading penny stock already, it’s not hard to see that.
- 2- Pump and dump stocks are penny stocks
You will never find a stock in a pump and dump list which is not a penny stock. All the pump and dump stocks are penny stocks. This should be your number one rule.
Penny stocks are the ones that are prone to those sort of manipulations. Although it’s illegal and considered to be a crime. It still happens as of today, in order not to fall prey to them you have to conduct your own research.
Don’t rely on what you’re hearing, look for your own information. According to Penny Stock Expert, only a handful of stock traders stay true to themselves when it comes to researching before trading.
It’s almost impossible to be successful trading penny stocks if research are not being done.
- 3- Reverse takeover
Most of the penny stocks that undergo a reverse takeover are usually being pumped somewhere along the way.
What’s a reverse takeover? It’s also known as a merger, you may’ve heard of it being called “Reverse merger” before. It’s a method used by private companies to become publicly traded.
They get this done by acquiring just enough shares to control a publicly traded company. And then those shares are used to exchange in the public company. Once this is done the private company has become a publicly traded one.
4- The flat liners
Some stocks are usually flat lined on their graphing figure. They’re stationed at one place and never make any move. All of a sudden the price start increasing out of nowhere.
Those stocks are the one you should be careful with because prices don’t just start increasing for no reason. Especially for a stock that never show any movement.
It’s considered to be a big red flag. Be very, very careful wit them!
5- Trading surge
Seeing share volume of a stock surges from 0 to over 1 million in one day should tell us something. Either they have some very good promoters out there, or they have a way to increase the volume themselves.
Don’t get fooled by them, their goal is to lose you money while they’re gaining money. They’re becoming rich at the expense of your hard earned money.
Conclusion
Pump and dump scheme is involved of artificially inflating a stock’s price to make lots of profit in return. Although it’s well recognized by now, many traders are still being preyed on by those con-artists.
From this blog, I highlighted some of the most seen signs that would signal you that a stock is being pumped.
Knowing how to spot the pump and dump stocks can save you a lot.
I know that there are so many other signals to recognize a pump and dump stock which are not listed here. Please take this time to complete this list in the comment section.
Also don’t forget to share this post with your pals on social media. It may be helpful to them too if it was helpful to you. Let’s help each other, sharing is caring!
As always, trade smart!
By P.S. Traders
source online
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Discussions
6 people like this. Showing 41 of 41 comments
Stockraider, you should be enlightening us on the the subject and not repeat what the author said. Disappointed.
2018-03-21 23:34
MARTINAM...U GO HENGYUAN...FOR THE ENLIGHTMENT LOH...!! RAIDER WRONGLY POSTED HERE MAH....!!
2018-03-21 23:36
Thank you for your free and great article. unlike those sifu who collecting fees is actually being preyed even with his so called 25 years of experience in TA OR FA or whatever.... Anyway, bragging is free...LOL
2018-03-22 00:21
Semua kaunter pun pump and dumb sebenarnya.inilah cara terbaik main saham di negara kita.kalau invest memang hancur
2018-03-22 04:16
Hengyuan profit will reduce as profit factor inventory gain in 2018 is absent or becomes loss. So buy lctitan la
2018-03-22 06:22
Pump and dump is just a rough and tought word coined up to glorify actual stock trading. What a BS and baseless article. Wasted my 5 mins..
2018-03-22 06:37
like this, cuba cari counter yang harga bawah 20 sen, shares pun tak banyak, monitor dulu, tengok movement, ada movement macam orang collect, kasi tau cik babe, X payah tunggu bones atau sesiapa tulis hehehe
2018-03-22 08:08
some people should understand that when SC resorted to took down the blog..they could already have a concrete evidences that such pump and dump scheme has took place. Pump and dump is just not purely promoting positive sentiments on the targeted stocks. It involve the perpetrators collecting the shares before he posted such misleading articles and then once the share price gone up. He would then sell to the market to the fooled buyers. This are different to analyst or IBs where they only just published their research reports (TP) on their covered stocks. Theres no way the accumulate the same shares before they publish such reports as this will also can be consider pump and dump. And also for the one who said that EPF also dump..i think u r dumb cause they dont mislead people!!
2018-03-22 08:58
bloodborne maybe SC sees that activity as day trading but not as buy 1st than promote like crazy
hehehe
2018-03-22 09:29
hi cik babe..they can pump and dump on the same trading day..that is always the case.
2018-03-22 09:48
As retailers become more educated, it is harder for operators to make money than 20 years ago.
2018-03-22 09:54
and investors should understand that stocks doesn't simply move up and down without any reason justifying such price movement. It could either someone collecting/selling because they perceived the share price is under/over value fundamental/technically, because of leakage of an inside info positive/negative, because of speculation arising from rumours (which are not mean to mislead) such as oil price are on the rise trajectory. If none of this cannot be find to justify the price rise..then there is high possibilities that the stock is being manipulated (i,e pump and dump or etc)..from my opinion
2018-03-22 10:30
Furthermore, in Malaysia there are strict laws which make insider trading an offence.
2018-03-22 10:32
pump and dump normally means happen to weak fundamental stock and sharks release all sorts of fake news/data to public in order for public to chase up the stock.
nestle is not pump and dump as the stock rise from 80 to 160 and profit taking is very normal, not to mention the company is strong.
2018-03-22 10:33
I learned from my remiser, if you q sell, lets say at 0.25, you cannot q buy at 0.25, nanti bursa query
2018-03-22 10:44
TESSA -- of course la thats like you are buying your own shares...No change in beneficial ownership
2018-03-22 10:49
One interesting thing about penny stock trading, is that these pump and dumps will often happen to the same stock over and over again.
2018-03-22 14:57
the currency of penny stocks is .......the pumping full of fake news, rumors and fake forecasts
what other currency they have?
2018-03-22 14:59
pump and dump scam illegal, boleh kena fine, kalau SC dapat tangkap image and credibility gone, malu weh
2018-03-22 15:09
PnD is like big bully in the school
Some big guy can bully small guy
;D
2018-03-22 15:31
salah maa mana ada pump n dump.....warrent cakap itu smart vs stupid atau sabar vs tk sabar je maaa....know when to trade or invest or cut loss maa..
2018-03-22 16:03
pump and dump jangan kena cekup, sekali SC tangkap jadi celebrity, famous for the wrong reason
2018-03-22 16:38
The wisest King Solomon says “Be careful of what you think because thought are the ones which shape you”
2018-03-22 16:39
Thank you for your free and great article. unlike those sifu who collecting fees is actually being preyed even with his so called 25 years of experience in TA OR FA or whatever.... Anyway, bragging is free...LOL
22/03/2018 00:21
bluebiznet, don't mind share with us who is this great guy ?
2018-03-22 17:28
gambling on stocks like this is risky, cause it teaches you a lesson on patience, greed, and fear.
2018-03-23 08:50
The majority of pump and dump operations involve penny stocks, but higher value stocks are not immune to this operation. (Just a reminder to keep this in mind too.)
2018-03-23 13:11
Good info.. pump & dump stock normally stock with didt have strong FA & refer the historical price almost making reverse V shape like XOX, Iwicity
2018-03-23 14:10
latest from star news portal
‘Pump and dump’ activities under scrutiny
The Securities Commission’s (SC) warning to investors over “pump and dump” scams over the week came about one year after Bursa Malaysia issued the same caution in a circular to the heads of dealing and compliance of stockbroking companies last March.
According to some market observers, warnings about “pump and dump” activities are timely and appropriate, considering the fact that there are now more new investors entering the local equity market.
“The regulators need to create awareness about the existence of these kind of speculative activities, particularly for new investors, many of whom are still learning the ropes of investing in shares and stocks,” one analyst with a local brokerage says.
“What’s more, some new investors tend to start with low-priced stocks – which are the main targets of ‘pump and dump’ perpetrators – in the hopes of seeing their money grow before proceeding to invest in higher-priced stocks,” he adds.
So, what is this “pump and dump” scheme all about?
Well, “pump and dump” is an age-old trick used by perpetrators to earn quick money at the expense of others through the stock market. The perpetrators can be an individual, or a group of individuals.
They begin their operation by acquiring a huge amount of shares in a company, typically one with penny shares or stocks selling for less than RM1 apiece, at a very low price, and then promoting it and creating a lot of hype around the organisation to “pump” up its share price.
They do that by spreading false or misleading information to create a buying frenzy for the stock. During the process, they will also trade in the shares of the company to create volume and upside in order to create the perception that something big is really brewing in that company.
But once the share price of the company skyrockets to a level they desire, the perpetrators will “dump” or sell all their shares to make huge profits. And that is when the share price of the company will plummet on unsuspecting investors, causing them to lose money.
Although pump-and-dump schemes have existed in the local equity market for many decades, the emergence of Internet and social media has provided a fertile new ground for perpetrators.
Pre-Internet and social media days, pump-and-dump perpetrators operated through syndicates, with members comprising selected brokers and remisiers, to promote a stock.
Now with technology, the work has been made much easier for fraudsters to reach out to hundreds of thousands of people with the click of a mouse.
As part of a crackdown on “pump and dump” activities, the SC and Bursa Malaysia over the week recently named a blog, Bonescythe Stock Watch, as one found to have published various articles that contain misleading and deceptive statements and forecasts. This is an offence under Section 178 of the Capital Markets and Services Act 2007 (CMSA).
The blog has since been removed following the SC’s intervention.
Be that as it may, pump-and-dump schemes have their supporters and opponents.
One broker, for instance, argues that such speculative activities are a “necessary evil” for a vibrant stock market.
“This is part and parcel of capital market development... it is always better to have a vibrant market than a boring one,” he explains. The onus is on the investors to trade wisely; some ‘innocent’ investors will still be able to make some money riding on the volatility created by speculative trading activities, if they are lucky ... but of course, there are many unlucky ones who will end up losing money,” he tells StarBizWeek.
Meanwhile, another analyst reckons that while the total elimination of pump-and-dump activities is not possible, some form of regulation is still needed to ensure orderly trade in the market, and wrongdoers not go scot-free.
“Ultimately, investors themselves have to do their own research.
“Use common sense and learn how to invest wisely,” he says.
As for how to spot a “pump” stock, the analyst notes that penny stocks are usually the ones most prone to this sort of manipulation.
“You will hardly find a stock in a pump-and-dump list that is not a penny stock.
“This is the number one rule,” he says.
“Another red flag is a sudden surge in volume to, say, more than one million in a day, when the counter used to be a thinly traded stock, and there’s a sudden jump in the share price, when the counter had hardly ever shown much price movement before,” he points out.
Typically, the analyst says, the company targeted for “pump and dump” does not have a good earnings track record, and has to ride on claims of offering “big upside potential” to drive up its share price.
“Anytime someone tells you there is big money to make from one particular stock, particularly one that does not have strong fundamentals, you have to beware,” he says.
In such instances, he points out, the old adage applies: If it’s too good to be true, it probably is.
2018-03-24 08:44
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qqq3
penny stock?
comes with the territory
2018-03-21 23:21