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4 Signals reveal latent Pump and Dump Scheme.
You won't become a victim of fraudulent pump and dump schemes. You'll save yourself from losing money in the stock market if you notice these signals in a stock.
You won't become a victim of fraudulent pump and dump schemes. You'll save yourself from losing money in the …
"Pump and dump" schemes are a type of stock fraud that involve artificially inflating the price of an owned stock through false and misleading positive statements, so the cheaply purchased stock can be sold at a higher price. Once the operators of the scheme "dump" their overvalued shares, the price falls and investors lose their money.
You'll see these 4 signals at the beginning of a "pump and dump" fraud - the stock fraud.
1 Over-Hyped Statements:
-> You'll hear phrases like "breakout stock pick" or "huge returns guaranteed". They're often red flags.
-> You'll read overly promotional press releases and postings on social media for a stock. Get skeptical.
2 Unsolicited Investment Advice:
-> You'll start receiving unsolicited investment advice through SMS, WhatsApp messages, Internet chat rooms, social media, email - these all are common platforms used for recommendations - Get cautious.
3 Penny stocks:
-> You'll notice that over hyped statements and unsolicited advice are for penny stocks or micro-cap stocks. Pump and dump schemes often involve penny stocks or micro-cap stocks, as they are easier to manipulate because of their low price and less regulatory oversight.
4 High Trading Volumes:
-> You'll track a sudden surge in the trading volume of this stock, especially during SMS circulation time.
Now Read This Statement Laser FOCUSSEDLY:
Whenever you suddenly encounter these 4 signals in a stock... GET BEWARE...8 out of 10 times PUMP and DUMP scheme is perpetrating... so you should dig deeper into records.
Here're the documents you should drill:
- Company's financial statements:
-> Look into the company's balance sheet's asset side.
... Do you see any tangible asset? Does the balance sheet have any cash or bank balance or debtors?
-> Review notes in the annual reports.
... Check what products does the company produce or deals in?
... What services does the company provide?
... Does the company've any operational history?
-> Read management reports.
... Track management profile.
... Evaluate the business model.
You'll notice that these companies have no assets, little to no operational history, and/or unproven management teams.
You can easily find these papers on the Ministry of Corporate Affairs website, in the stock exchange filings and other regulatory filings.
Remember, if the company is not regular in regulatory filings, then it's a big red flag.
Last but not least -
1 Use Reputable Brokers:
Ensure that you always use reputable brokers registered with financial regulatory bodies. 2 Seek Professional Advice:
If you're unsure about an investment, consider seeking advice from a financial advisor or investment professional. They can help you evaluate potential investments.
Finally remember,
-> if an investment opportunity sounds too good to be true, it probably is a sham.
-> Always exercise due diligence before making investment decisions.
-> Understand the Risk with Penny Stocks. If you choose to invest in these types of stocks, do so understanding that penny stock carry high risk.
