What is a “pump and dump” scheme?

Let’s assume a shady character wants to make some quick money. He can identify a company that rarely trades or has super low volume on any given day. After identifying the company he would slowly build a position in the stock trying not to move the share price up as he accumulates.

When he is satisfied with the amount invested he will distribute some sort of marketing, a news report, or other PR (THE PUMP) that will likely mis represent the future of the company. If he’s good he can get lots of people to buy the stock in a short amount of time, at which point he sells (THE DUMP) the shares he bought earlier, leaving “bag holders”

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