DEFINITION of dump and pump
Dump and pump trading strategy consists in the search of shares or other exchange instruments whose prices have been broken up by the news, rumors, and other manipulations.
WHAT IT IS IN ESSENCE
A dump is an investment scheme where untrue statements are publishing about a particular stock. The purpose of this is artificially increasing the stock price. It is in connection with the pump. The scheme is essentially a scam. And the perpetrators use this opportunity to sell their positions that they acquired. And they do that before the fake news came out at much higher prices than they bought.
A pump and dump are basically broken down into two parts. The first part is where the perpetrators boost the price of a specific stock using misleading statements. These statements are releasing via social media platforms or bulletin boards.
Often high prices, for example, shares, are the result of PR companies. They are not proof and do not have a foundation in the form of financial companies’ results.
HOW TO USE
Often the strategy of trading, dump and pump mean the opening of short positions. In the moment when an imbalance arises in a strongly increased stock after sharp vertical movements.
The pumping organizers sell the shares to the crowd on growth. And when the interest of the crowd to buy at high prices disappears, prices start to fall off. Then it returns to the point from which growth began and even fall below.
Lately, among large-scale pumps and dumps, there is pumping of crypto-currencies. At the end of 2017, everyone was talking about bitcoin. It was possible to observe a powerful PR company before trading in futures for this instrument.
In a variety of publications, it was claimed that bitcoin would cost 100,000, one million dollars. At the same time, crypto-currencies did not have any specific legal status in many countries.
It was also not clear how to lead a fundamental analysis of the cryptocurrency.
Often, under the look of a fundamental analysis, you can see a ridiculous analysis of rumors on Twitter. The owners of a certain cryptocurrency feed the public with “news of the future”.
In general, there are many signs of pumps and dumps in cryptocurrencies. And the behavior of the price of the same bitcoin, crypto tokens confirms this.