Candlestick Trading Blog
September 29, 2009
Stock Recommendations
| Stock recommendations are few and far between. Just be sure that the resource you are obtaining hot stock market tips from is credible. There are schemes that exist in the world of stock investing and in today’s article we discuss two of these schemes. These include the pump and dump scheme as well as the short and distort scheme. The pump and dump scheme occurs when there are attempts to boost the price of a stocks through stock recommendations based on false, exaggerated or misleading statements. Those who produce these false statements have already purchased the stock and have established their position in the company’s stock. They then sell their positions after the hype has led to a higher stock price. This is an illegal practice and it can lead to extremely heavy fines if the perpetrators are caught. The victims of such schemes lose a considerable amount of money because the stock price more often than not falls back down after the process is complete. This scheme used to be done through cold calling, but since the advent of the internet, they are often done online and they target micro and small cap stocks since they are easiest and fastest to manipulate. Another scheme that deals with false stock recommendations includes the short and distort scheme. This scheme deals with short selling. While short selling itself is not only permissible and a great way to make money investing, short and distort schemes occur when misinformation is used by the seller in a bear market. Short selling stocks is the practice of borrowing stock in the hopes that the stock price will soon fall, allowing traders to buy it back for a profit. This scheme occurs when sellers manipulate stock prices in a bear market by taking short positions and then using a smear campaign to drive the price of the targeted stock down. Basically these sellers buy stock and issue false statements that cause the target’s price to increase. While the pump and dump scheme is more known by stock investors because of the long bullish market, the short and distort scheme is known as well. It is important for traders who are looking for stock recommendations and who are new to short selling to be ware of this scheme to avoid becoming a victim. While these schemes exist, they are no reason to avoid investing in the stock market. Awareness if the first step and if you are ever unsure of the information you are receiving you should go back and do your own research. Besides investing decisions that you make should only be based on your own research in the first place. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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