What is a "Pump and Dump scheme" and how can they scam your money using penny stocks?
Hi, I'm Henrikh. Let’s cover these questions.
Pump and dump is a scheme that tries to pump the price of a stock through recommendations based on false or misleading statements. They collect a broad audience and announce some stock price predictions. They pump the stock price up for insiders to exit their positions. So there is a very low probability that the stock price will ever go higher than the pumped price. When it's your time to buy it, it's already too late, as it's their time to sell it. So they push the junk stocks on you at higher prices, trying to make you feel that you manage insider info. Still, there is nothing insider or even valid there. They do it via newsletters, mailing lists, subscriptions, social media messages or posts, private chat rooms, and groups. Ask yourself why they prepare the audience that the news will come out at an exact time, let's say, at 2:00 PM on Tuesday. That only has one explanation. They need the whole audience buying power to take place at the same time. So that a big wave of buyers is created and the stock price rises a few times so they can sell their big chunk of shares and run from the deal.
Their goal is to make you believe that XYZ stock will go to the moon soon, because of some BS information. People think that the stock price will get a thousand % gain soon. And the scammers just capitalize on people's emotions, the greed that people want to make a quick buck overnight. And there are many people with a lack of right education that are a potential audience for such schemes.
Such schemes are easy to run on penny stocks as the penny stock market is very narrow so that when a little money comes in, the stock price moves up vastly.
I’ve lost money myself being in the targeted audience of those schemes when I knew nothing about stocks. Not even knowing what a financial statement or value investing is. I had also never heard about Benjamin Graham. That was way ago. I thought I was in the right direction. In reality, that is a trap that can attract many people. Everyone wants to get rich quickly. So I'm very happy I’ve lost some money then and have learned my lesson and have decided to get educated instead of playing those games.
Let me describe all kinds of people that are involved in this game.
#1 type of people are those who think a pump and dump scheme is something they can listen to. They think the scammers provide valuable analysis for some stocks or have insider info that they share with a narrow group. And that kind of people are trapped by this trick and invest in those stocks. They think they found the next ten baggers.
Another type of people in this game are those who know what a "pump and dump scheme" is. They think they will be earlier than the mass, so they can buy shit and push it to other people who are willing to buy it even at higher price levels. Usually, people in this group are charged for a membership and are informed about the coming wave sooner than the actual mass of people. But that's not a guarantee that those people will always stay in that position. Usually, they are scammed later as well.
Another kind of people in this game are those who think they can profit from the significant price drop when the insiders sell. At the end of the day, those people usually lose money as well.
And there is another type of people who just make money by selling courses on how to profit from the pump and dump movements. So who wins in this game? Only the scammers win and some insider traders who have deep relationships with those scammers. And also those people who make money selling training courses about how to catch a pump and dump wave. Nobody else wins. All others lose heavily, having hope that everything will be ok soon.
So my advice is to stay far from those things and be closer to the real things that create value in this world. Buy courses not to learn how to scam scammers and rob robbers, but buy courses on how to learn to invest and to create value in the world and benefit financially from those value-adding world-changing events. Educate yourself to buy stocks using your own mind for the long-term investment, not to buy stocks because someone bought or told you they bought them. Even if you won once by chance using those schemes, be sure, you didn't learn anything about investing, instead, you just expanded the demand for those scammers. So, how will you make money next time, without the right education? Also never ever think you can be an insider with the information which can be found on the internet.
Never ask anyone for investment advice; instead, learn to invest yourself.
What is a "Pump and Dump scheme" and how can they scam your money using penny stocks?
Hi, I'm Henrikh. Let’s cover these questions.
Pump and dump is a scheme that tries to pump the price of a stock through recommendations based on false or misleading statements. They collect a broad audience and announce some stock price predictions. They pump the stock price up for insiders to exit their positions. So there is a very low probability that the stock price will ever go higher than the pumped price. When it's your time to buy it, it's already too late, as it's their time to sell it. So they push the junk stocks on you at higher prices, trying to make you feel that you manage insider info. Still, there is nothing insider or even valid there. They do it via newsletters, mailing lists, subscriptions, social media messages or posts, private chat rooms, and groups. Ask yourself why they prepare the audience that the news will come out at an exact time, let's say, at 2:00 PM on Tuesday. That only has one explanation. They need the whole audience buying power to take place at the same time. So that a big wave of buyers is created and the stock price rises a few times so they can sell their big chunk of shares and run from the deal.
Their goal is to make you believe that XYZ stock will go to the moon soon, because of some BS information. People think that the stock price will get a thousand % gain soon. And the scammers just capitalize on people's emotions, the greed that people want to make a quick buck overnight. And there are many people with a lack of right education that are a potential audience for such schemes.
Such schemes are easy to run on penny stocks as the penny stock market is very narrow so that when a little money comes in, the stock price moves up vastly.
I’ve lost money myself being in the targeted audience of those schemes when I knew nothing about stocks. Not even knowing what a financial statement or value investing is. I had also never heard about Benjamin Graham. That was way ago. I thought I was in the right direction. In reality, that is a trap that can attract many people. Everyone wants to get rich quickly. So I'm very happy I’ve lost some money then and have learned my lesson and have decided to get educated instead of playing those games.
Let me describe all kinds of people that are involved in this game.
#1 type of people are those who think a pump and dump scheme is something they can listen to. They think the scammers provide valuable analysis for some stocks or have insider info that they share with a narrow group. And that kind of people are trapped by this trick and invest in those stocks. They think they found the next ten baggers.
Another type of people in this game are those who know what a "pump and dump scheme" is. They think they will be earlier than the mass, so they can buy shit and push it to other people who are willing to buy it even at higher price levels. Usually, people in this group are charged for a membership and are informed about the coming wave sooner than the actual mass of people. But that's not a guarantee that those people will always stay in that position. Usually, they are scammed later as well.
Another kind of people in this game are those who think they can profit from the significant price drop when the insiders sell. At the end of the day, those people usually lose money as well.
And there is another type of people who just make money by selling courses on how to profit from the pump and dump movements. So who wins in this game? Only the scammers win and some insider traders who have deep relationships with those scammers. And also those people who make money selling training courses about how to catch a pump and dump wave. Nobody else wins. All others lose heavily, having hope that everything will be ok soon.
So my advice is to stay far from those things and be closer to the real things that create value in this world. Buy courses not to learn how to scam scammers and rob robbers, but buy courses on how to learn to invest and to create value in the world and benefit financially from those value-adding world-changing events. Educate yourself to buy stocks using your own mind for the long-term investment, not to buy stocks because someone bought or told you they bought them. Even if you won once by chance using those schemes, be sure, you didn't learn anything about investing, instead, you just expanded the demand for those scammers. So, how will you make money next time, without the right education? Also never ever think you can be an insider with the information which can be found on the internet.
Never ask anyone for investment advice; instead, learn to invest yourself.
