Pump and dump


Pump and dump simply means that you can inflate a stock’s price then dump it.

Pump and dump on the short side means the same.

You are sitting in your office staring at 4 computer screens and reading the ticker.  All of a sudden a stock shows 5,000 shares bought by one person.  You then think that the stock is going up and you buy (use 5 million for real pain).

OR you are looking at the ticker and a stock just saw 5,000 shares sell to one person (use 5 million) and you fly into panic thinking this stock is going down.  You hit the sell button.

Pump and dump used to be internet scams mostly but now professionals also use it.  Hype up a stock so that it can rise and you sell your shares at good money.  Oh hype down a stock so that its price tanks and you buy it cheap.

Most Pump and Dump tend to happen in premarket and post market.  But actually now that the professionals are in it, it can happen mid day trading.  Everyone wants money made at your risk and who even cares if you cannot pay the mortgage because you fell for P&D?

Many new comers into trading make the mistake of not reading weekly and monthly charts and most only read 15min or hourly charts.  The short cycle charts can be deceiving because P&D can never cheat the weekly or monthly charts.  This is why seasoned investors and traders keep an eye on the short term charts and have another screen showing the daily and another one showing the weekly and another one showing the monthly.

Technology has evolved a lot so now you can actually have 4 screens wired to your computer with each showing you different results (think about having Tokyo, London, Toronto and NYSE).  In my days, it was a screen per computer so my trading office was always too heated up for all the computers I had and also had to always watch CNBC.  The place looked like a stock floor but now we can wire screens on only one computer.

Martha Leah Nangalama

Moncton, Canada

I have an IT and Business background.  I own shares and mutual funds and have traded in the past.  My opinions are solely mine and do not reflect on The Insider or any company I am affiliated with.


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