Pump and Dump

Pump and dump or “hype and dump” is something you need to be aware of when you are in the stock market. And here’s why.

When scam artists want to make money in the stock market here is what they do. They buy a number of shares of a stock, normally a penny stock and hype it up.

They do this through email newsletters, phone calls, or any way they can reach a large amount of people. All these people buy the stock and that forces it to go up. Then the scam artist exits the trade at the overinflated, leaving everyone who bought it to ride the penny stock all the way down as it crashes.

So, now that you know how a pump and dump scam works how do you avoid it? Simple, Don’t Buy Any Hot Tips, especially from people you don’t know. Buying “hot tips” normally doesn’t work even if the tip comes from someone that means well.

It is best to do your own research when selecting a stock, and make decisions based on facts that you know are true.