How dumps and pumps work on the stock exchange: mechanism, consequences and methods of protection

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Hey, when it comes to financial markets, dump and pump are like dirty tricks in a street fight. These strategies are used to artificially inflate and collapse prices so that manipulators can line their pockets. They play on emotions, causing investors to vacillate between greed and fear. Let me explain to you how it works and what you can do to avoid getting hooked.

Pump đŸ’„

A pump is when someone starts buying certain shares or cryptocurrency en masse, creating the appearance of huge demand. Imagine a crowd of people suddenly starting to buy ice cream, and you decide what you want too. The price of the asset begins to rise, and newcomers, seeking quick profits, also join the game. As a result, the price skyrockets.

Dump 💣

Dump is the opposite side. As soon as the price reaches its peak, manipulators begin to massively dump assets at an inflated price. This causes panic: investors realize that they have been deceived and begin to urgently sell their assets before the price collapses completely. As a result, the price drops sharply, and those who did not manage to sell on time are left with losses.

Working mechanism đŸ› ïž

These schemes are usually carried out by groups of manipulators, coordinating their actions through the Internet and social networks. They can advertise an asset, spread false news, and even create fake news feeds to push investors to take the necessary actions. After creating artificial supply or demand, they provoke short-term price fluctuations in their favor.

Consequences 💔

The consequences of a pump and dump can be catastrophic. Sharp price increases undermine confidence in financial instruments, increase market volatility, and can even trigger regulatory investigations. Uninformed investors lose their money and the market suffers.

Ways to protect yourself đŸ›Ąïž

To avoid falling for the pump and dump scam, you need to be vigilant. Conduct a fundamental analysis of assets, do not blindly follow the advice of dubious “experts” and follow the news. Look closely at trading volumes and do your own research before investing.

Conclusion ✹

Pump and dump are dirty schemes that can cause serious damage to both individual investors and the market as a whole. To protect yourself from them, you need to be informed, proactive and use common sense. And now that I understand these schemes, I can say with confidence

: Don't be fooled!