How Do Stock Market Manipulation Schemes Work ?
Posted on October 1, 2009 by Online Scams in Articles
How Do Stock Market Manipulation Schemes Work ?
Stock market manipulation schemes involve fraudulent changes in the natural rise and fall that comes along with market investments. Since active traders cannot directly force a stock to rise or fall on their own, they have to get creative if they want to force a turn in the market that will be favorable to their own investments.
This is where the Internet has come in very handy. Those involved in this type of fraud use message boards, email, chat groups, and a variety of other online resources to create a sense of panic among other investors.
They may go through these message boards and pass around information that leads others to either sell off or buy into a particular stock. This will have a desirable effect on their own stock investments.
For example, those who own a lot of a particular stock and want to see good returns on it may send out messages that promise that stock is going to explode or shoot up in price. This encourages many other people to invest in the stock, which raises the rate for that stock. At that point, the scammers will sell their own shares at the higher value, making nice gains on their own investment.
This method is called “pump and dump” and sometimes scammers may even create a business that doesn’t actually exist. After they sell their own shares the company falls apart and all other investors lose their money.
Some scammers will work this in reverse. They send around negative information about a particular stock, which causes the price to fall. They can then purchase their own shares at this lower rate before the negative information falls away and the price rebounds.
Trading on the stock market requires great judgment and strategy about when to buy and sell. The rise and fall of rates is ongoing, but when they are manipulated by scammers out to make their own profit it can mean big losses for other people.
The best way to protect yourself from this type of scam is to recognize that great stock market trading tips are not going to come in your email inbox or through a chat group like magic. If it does, a scam is likely behind it in some way.
