what is penny stock manipulation

Published on November 14, 2022

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Market manipulation is part of the game. Stories of the original stock trading icon Jesse Livermore launching “bear raids” and the Hunt Brothers cornering the silver market to today’s stock “spoofing” and VIX rigging abound where ever active investors congregate.

The best way to think about manipulation is to accept it as part of the market structure. As retail investors, we cannot control or change how the big boys play the game. Understanding that manipulation can work for or against you, depending on your position, helps remove worry about these sometimes unethical or illegal practices.

Also, it is critical to understand that stock market manipulation is mostly always in the concise term. In other words, it has the most adverse effect on day traders and other short-term investors. Make no mistake, long-term concentrated manipulation can and does take place. However, investors can definitely profit from long-term manipulation, as it results in price trends that can be exploited.

The best way to protect yourself from stock market manipulation is to think long term. Understanding the types of manipulation can allow you to make better decisions when investing.

Here are five ways stocks are manipulated:

  1. Fake News

The term fake news has become very popular recently. The Trump Administration, in its efforts to “drain the swamp,” has exposed the many ways media manipulates the news.

Large or media-savvy stock market players have long attempted to spread the fake news about a company or even the entire market to make it move in their favor. The shady world of penny stock promoters is the classic example of fake news being used to manipulate stock prices.

Protect yourself from fake news by always confirming the source of the news before acting upon it. Be warned though that the time drain from this can result in your missing the move.

One way I use fake news to profit is to fade the initial move. This means to wait for the stock to spike higher or lower based on the dubious news then enter a trade in the opposite direction. The fading tactic is also quite profitable if the news is real, given the traditional wisdom “buy the rumor, sell the news.”

  1. Pump And Dump

A derivative of fake news, pump and dump manipulation is done via mass email or even regular mail. Usually the province of penny stock promoters, pump and dump manipulators send out millions of glowingly bullish proclamations about a company to attract buyers.

The “pump” occurs as the retail masses buy into the stock, resulting in the price and volume spiking higher. Once the regular investors are committed to the stock, the promoters sell their shares (“the dump”), causing the price to plunge.

The best way to protect yourself from a pump and dump is to avoid buying stocks that are rocketing higher. Nimble traders can profit from pump and dumps by fading the move higher as mentioned in the last section.

Understanding that a pump and dump is taking place and fading the move is a time-honored way to profit. Just like with fake news, wait for the price spike to start rolling over on the chart and short! Fading the move places you on the same side as the pump and dump promoter, virtually guaranteeing a winning trade.

  1. Spoofing The Tape

Spoofing, also known as layering, the tape is when sophisticated short-term investors place orders in the market with no intention of having them filled. Other investors see the large orders waiting to be executed, believing that a market whale is trying to buy or sell at a certain price. Therefore, the investor places their order at the same level to buy or sell.

  1. Wash Trading

This tricky form of manipulation is when a big player buys and sells the same security continually and nearly instantaneously. The rapid buying and selling pumps up the volume in the stock, attracting investors who are fooled by the spiking volume. Once again, this form of manipulation does not affect long-term investors.

  1. Bear Raiding

Bear raiding is when a large player forces share prices lower by placing large sell orders. The price plunges as stops are hit, adding to the selling.

How Penny Stocks Are Manipulated

How Penny Stocks Are Manipulated, what is penny stock manipulation.

How To Select Cent Stocks For Maximum Revenues?

Ensure you have a standing stop order in location for your portfolio. Lots of financial bad guys make use of the loose regulation to practice all manner of criminal activities. But investment shouldn’t be done blindly.

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Micro cap stocks by meaning trade under 5 dollars. Are you wondering how to generate income with cent stocks? Investing in Penny Stocks can indeed increase earnings. That’s absolutely low-cost and appealing to buy.

Many individuals today want to buy cent stocks. This is not surprising. Cent stock investing has really remove in the previous couple years because the stocks are so inexpensive and the profits can be so high. You will only get those high earnings though if you know how to invest. Cent stocks are an entire various sector than regular stocks. This is why a lot cash is lost in penny stocks every year. There are too numerous ignorant investors simply speculating on good choices. Those random, uninformed stock picks usually cause huge losses for the financier.

Generally, these stocks are low priced shares readily available for less than a dollar each. The Best Penny Stocks to buy are those which are chosen carefully. As these stocks are budget-friendly, many people choose to purchase them. One can own a company by shelling out a small amount of cash as compared to recognized organizations. A financier availing their stocks can earn maximum revenues on the cents if the companies have the possible to multiply their possessions. Owing to their low rates the penny stocks are purchased in great deals and a small change in the rate can lead to extreme revenues and or losses.

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3)Too Lots Of Picks. Business that recommend lots of choices a week are worthless. The typical person can not buy that many stocks. Plus, some companies will never ever reveal the losers as they never appear as a sell. Rather they simply let them go on as open trades forever or till the business gets de-listed.

While this might seem to be a discouragement, trading them can be extremely financially rewarding. This is especially real for those who have been best about a company early on. So do not decide to avoid such Penny Stocks Trading. If there’s one piece of recommendation on how to trade them, it would be to have some flexibility. Although, this calls for confidence and guts, so be sure you’re all set for the challenge.

Thinking about the above, it is most likely not a great concept to attempt to select penny stocks by yourself, regardless of whether or not you are a knowledgeable trader. Unless you are prepared to turn it into a complete time profession AND you have that “Columbo” (or Monk) flair piecing together ideas that nobody else appears to be able to see, you’ll most likely never ever get proficient at these types of stocks.

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Think it or not, the answer isn’t much of a trick. Cent stocks are very different from other stocks in that there is a higher danger of being the victim of scams. Many individuals today wish to buy penny stocks.

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