The answer is we can’t prevent it but we can certainly avoid it. Pump and dump scheme in stockmarket might be a threat to your capital. Pump and dump take place when individual purchase (pump) large quantities of stock, then promote it using positive fake news or misleading information. If they succeed, this artificially inflate stock price and trading volume. When their target price hit, they will suddenly dump (sell) their stock and stop promoting it that triggered price of stock to decrease, then investors left on top significantly loss their money.
Since fraudsters cannot be prevented, here are few tips to avoid pump and dump scheme:
1. Research stocks using credible news sources. If you want to trade and invest in the Philippine Stock Exchange (PSE), you must consider finding reliable information in PSE edge at edge.pse.com.ph. This site will give an edge in the announcements, financial reports and other periodic Securities and Exchange Commission (SEC) and PSE reportorial requirements of publicly-listed companies. This will also give you an updated index summary, dividends and rights information, halted and suspended stocks and most viewed stocks disclosures. In fact, the site has a world class disclosure system.
2. Do not solely believe in a publicly-traded company financial news articles you browse from Facebook and Twitter. I’m not saying that posts from there are all fake, but I am sure that there are lots of fake news out there.
3. Avoid relying on the data and information issued by brokerage firms in their sites because “sometimes” they publish false and misleading information. Try to verify the information with PSE edge website. I believe that it will give you more genuine company data and information.
4. Do not trade and invest with your emotion or get over-excited to buy when you see that stock (especially penny stock “basura-stock” which can be easily manipulated) suddenly appears bullish without any good signs from technical and fundamental perspective.
5. Dig deeper and do your own due diligence.
Disclaimer: These tips are based from a safe trading and investing perspective.
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