The Psychology of Penny Stock Pumps

Will following a penny stock newsletter work for you ?

In today’s world of digital media you may have seen the rise of many penny stock newsletters and the promised┬áprofits for their subscribers. What they wont tell you is that most of these promoters are either profiting by getting into the stock before others or are paid by other promoters that do the same.

Essentially the strategy is to quietly buy the stock, promote it via newsletters and social media to create a buying frenzy. Once the price is high the promotes then dump the stock causing the price to crash. This is known as a pump and dump and is a common tactic used by these manipulators.

How to profit on penny stocks ?

Be on the smart side of the trade !

We know that most penny stocks are bound to fail. Typically these companies have little assets and a bleak future. After all, their stock is worth less than a dollar and are typically not even on an exchange. The short term hype created by these promoters can be exploited by playing the same game against the masses.

There are some notable penny stock newsletters that find these short term pumps and short sell shares in order to profit when the stock crashes, typically the same or following day.

By shorting when the price is high you ensure the best chance of optimizing profit and taking advantage of inexperienced traders that are buying into the hype. Since there will be a lot of buying activity it will be easy for you to find shares to short sale and subsequently make a profit once the hype dies down.