How to Spot a Pump and Dump Campaign

If someone makes a stock pick there should be two parts which consist of a call to buy and a call to sell. Unfortunately, a lot of the pumpers out there neglect the call to sell and/or place the target sell price above normal reasoning or above their exit price.

How it works

A group targets a stock and enters at the pre-pump value then begins promoting heavily among their followers and also reach out across all social media. Once the stock goes on a run the group sells their shares for profit then massive selling triggers a rapid drop which in turn ignites panic selling among the more paper-handed traders. FUD campaigns can also help with panic selling. Now there is a large group of investors that are holding shares worth far less than what they paid for them.

How to identify a Pump and Dump

Look at the person(s) making the recommendation. If you do not know or trust them then you should think twice. Are their prior recommendations good? Just because prior picks show 100% gains doesn't mean it wasn't a previous pump and dump campaign. Are comments about them good or bad? Try researching for yourself to determine whether the stock is undervalued or not. Look for these red flags and make a determination as to whether to follow their wisdom, capitalize on the pump and dump campaign by going along with the pump, selling ATH (At The Height), then shorting the dump or move on to a different opportunity altogether. You can be a part of a great stock that just so happens to have a few pumpers so don't be discouraged by their presence just be aware of why they are there.

26 views0 comments

Recent Posts

See All