Penny Stock Pumpers and Bashers

A penny stock is more susceptible to manipulation because of the relative low value compared to the available wealth of individuals or small investment teams. In addition, the markets are less regulated so there isn’t as much chance of negative consequences for those who game the system. One style of these cheaters are the pumpers and bashers.  Before contemplating which penny stocks to buy, you should be aware of these types of individuals and the effect they can easily have on penny stock prices.

A pumper is a person who uses phones, magazines, email, websites, and online forums to encourage others to purchase a penny stock. Conversely, a basher is a person who uses these same forms of communication to encourage others to sell a penny stock. Using these styles of contact and many new ones (social media, text messaging, blogs) thousands of potential traders and investors can be reached. If even a small percentage of these victims are convinced to listen to the pumper or basher it would greatly influence the normal trading volume for that particular penny stock.

A person pumping a stock has long already purchased the penny stock at cheap prices quietly over a long period of time. Now they want to encourage others to start purchasing as well in order to raise the price. Their hope is enough investors will buy in to fool the traders into thinking the penny stock is actually on the move. If this happens there will be a second great surge for the scam artists to sell their stock into. Then the investors and inexperience traders are left with truly worthless penny stocks.

A penny stock basher is someone who knows the value of a company and attempts to encourage others to sell through the use of fear tactics and blatant false claims.  There hopes is that the penny stock will dip in price long enough for them to scoop up a bunch of shares at cheap prices.  Again, the main reason this type of manipulation is possible, is due to penny stocks being so illiquid.

To avoid such scams, a good rule of thumb is to remember that no one cares about your finances like you do. So don’t take their word on what you should invest in. Unless you are paying the person for their advice, as in the case with financial advisors or penny stock brokers, they are likely attempting to make their money off your misfortune.

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