Pump and Dumps
I am sure you have heard the term pump and dump before. It is a term passed around a lot when it comes to penny stocks or any type of OTC stocks. People refer to pump and dumps as a stock that goes up very high very quickly and then comes back down fast and rapid as well.
It is no secret that market awareness and promotions seem to have a huge impact on stocks that are penny stocks. Excitement and human emotion seem to be a driving factor in the market.
We do not like the term pump and dump. The truth is a lot of real companies get attention and enthusiasm and the stock price takes goes up quick forming a parabolic curve. A lot of very popular penny stocks follow a chart pattern similar to the generic bubble chart you see circulating around the internet.
Our goal has always been to find stocks in the awareness phase and take profit when the stock starts entering the greed phase.
There are three types of People when it comes to Parabolic Super Hyped Penny Stocks.
The Believer- This is a person that is dead set on getting rich on a certain stock. They buy into all the hype and they don’t plan on selling the stock until they make millions and can afford their Lambo. The Believer brainwashes themselves to never question anything. They will spend hours each day talking about the stock and arguing on social media and on IHUB. They will use terms like “lock up your shares” or call people “bashers”. There are paid promoters also pretending to be believers. Believers always talk about “DD” and “knowing what you own”. The believers at certain points can be up huge on a stock but their greed never allows them to take profits. They will end up holding until a stock falls below their initial investment. They will then buy when the stocks continue to fall and average down. They don’t have any rules when it comes to taking profit or cutting losses. They usually end up losing most of their money. In the end, the believer never learns. They blame “bashers” or “shorters”. I would estimate that 80-90% of penny stock traders fall into this category.
The Complainer- This is the type of person that will spend a lot of their time complaining about penny stocks. They will spend time calling them scams. In most cases, The Complainer is someone who was once a believer but lost all their money or is still a believer in another stock and is jealous that another stock is going up while their stock is going down. The Complainer gets labeled by The believer as a “paid basher” or a shorter. There are different types of complainers. There are those that are just bitter angry souls with too much time on their hands, there are those that are trying to save people from losing their money, and there are those who know a stock is about to crash and warn people to help those people save money while at the same time building a following. In most cases, the Complainer may know what he is talking about when it comes to penny stocks but their timing is off. Despite usually being more knowledgeable and experienced than The Believer, The Complainer misses out on a lot of money through wasting time complaining and sitting on their hands and never actually trading these stocks.
The Pro- This is an experienced trader that looks at penny stocks as an opportunity to make money by buying low and selling high. The Pro is someone who has put in the time learning chart patterns, reading SEC filings, and understanding market awareness campaigns. The Pro won’t always be right but they win more than they lose. The Pro doesn’t need to believe in a company but has the ability to recognize the believers and hype. The Pro recognizes when a company is being promoted or spending money on market awareness. The Pro is able to buy when a stock is in awarenesses phase and sell when they see people getting too greedy. The Pro didn’t become the trader they are overnight. They were also at one time “The Believer” as well as “The Complainer” before they became The Pro. The key is they never gave up and never stop learning. Less than 5% of people trading penny stocks are in this category.
Ironically there is money to be made on almost every penny stock as well as every “pump and dump”. At the end of the day, what separates the winners from the losers is timing.