Pump & Dump PennyStocks

Chatrooms Pump & Dump and how to avoid it:

 

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Today’s blog is about my experience in a Pump and Dump day trading and how to avoid them. For the past two years I’ve been trying to make a career out of trading penny stocks. The risks are extremely high and the rewards are also extremely high. No professional trader will ever convince me that Penny stocks and certain stocks will have an “80/20” trade (80% reward and 20% risk) because penny stocks carry higher risk of losing versus gaining profits. Unless its a chatroom pump and dump; which brings me to my next point in trading pump and dump.

Lots of chatrooms are and have been long established to fool new traders, and young youth of traders into making him/her think they will be the next Wall Street king. I’ve witnessed over a total of five (5) different well established scam chatrooms in the past two years. I’ve also witnessed and documented most of the same chatrooms on how they have developed and maintained a multi-million dollar industry of trading penny stocks inside chatrooms.

When you own a chatroom and have over 1000 plus subscribes inside who are willing to copy your trade, it creates a self-confidences of knowing your trade will be profitable. Therefore, when they say 80/20 they are most likely are referring to themselves. I joined Dekmar chatroom back in July 2016. His chatroom included 100 to 150 active regular traders, the rest were floaters (new subscribers who either have signed up for his two week free trail, or free chat Tuesday) And for those who follow him for a while, know about the free chat Tuesday. In the recent days, his current chatroom subscribers are over 1000 members who are a mix of new and old traders. Furthermore, the average subscriber’s lifetime paid member would average 3 to 4 months until he/she figures out that its a total failure and end up losing his/her cash. Most new traders join chatrooms with an average 2,000 to 4000 USD account, in hopes they will turn it into a million dollar account. Total scam, nothing comes easy, especially earned money, unless you own a chatroom with subscribers over 1000 members.

To best explain my experience in chatroom pump and dumb, here is an intraday chart of a stock that was involved in a pump and dump.

$ORPN started off opening at about 2.5 and it spiked and ran as high as 6, which is a major gain without news nor recent major changes in the company’s performance. I witnessed DekMar alerting this stock long once it breaks 3$, but he has entered a full position (9k plus shares) at average 2.7 and he sold in the low 4$ profiting about 15,000 USD in less than 45 minutes (due to multi halts) during trading hours.

The stock went down and back to the original 2.5ish price range in few hours. So, as you can see, it was a clear pump and dump trade that gave chatroom owner dekmar the biggest percentage gain, leaving his sheep followers in the dust. And if they are lucky, and smart they might of walked out with some gains but never as much as the owner of the alert he/she alerted inside their chatrooms.

Till today, I still can’t figure out why would anyone risk his/her own money trusting a scam artist like dekmar and many other well known traders in the same industry I.e., Ross and Tim Sykes, who combined have over 10k plus subscribers.

My advise to new traders is to never pay someone who is not a financial advisor or professional to tell you how to invest your money, which most of those chatroom owners are not a financial advisors nor have a real college degree in anything. For example, DekMar, he is a drop out from a local community college, and came from a low income neighborhood of a father and mother who were just a school teachers making 40k a year.

Please Note:
I do not know how quickly or slowly upside may or may not be realized, therefore please assess the trade situation for yourself.
Equities can be extremely volatile, so if you aren’t able to secure your desired entry and the stock starts moving without you then you can always wait.
Pullbacks/consolidations often present the best risk adjusted opportunities to experience gains because you can get in right above support and cut losses quickly in case the trend fails. Establish a stop loss that is appropriate for you.
As I say, I would always make limited orders and never market orders, Since every traders/investors circumstance is different, make sure you create a personalized approach that works for you and always consult a financial adviser (not me).
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