Mon 26 May 2008 Cross-reference from www.tradingsuccess.com/blog/
Pump & Dump
Posted by ray under Miscellaneous
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I would like to start by introducing myself ; I am Ana aka Idkit.I just received an urgent message from Ray ,whose hip and back are playing up, to step in as his ‘guest blogger’ for today.
In a flash, I thought it may be informative if I post a topic that is common knowledge among traders but not so common among novices. As a slightly advance trader than novice traders, I think it may be useful information if I touch on the media.
It is a fact that many Wall Street firms and their analysts took billions of dollars from individual investors. How? Launching worthless IPOs or initiating coverage with strong buy recommendations , way too late.
A good lesson is from the 2000 US Presidential Election, when many TV stations wanted to be the first to air breaking news. Alas, many times, they jumped the gun. They would report a story about the cure for Alzheimer disease, for example, and the stock shot through the sky, only to plummet when it was reported that the CEO of the company was ‘ mysteriously misquoted.’
There was another stock editor who was responsible for moving many stocks sharply in price in 1998-1999. In 2000 and 2001, he was more cautious due to complaints received by the network. He still teased the viewers about his upcoming reports and those who knew what stocks he was going to talk about bought. Upon release of his report, these same buyers would sell to viewers who were watching on TV and listening to his report and recommendation.
RESULT:This stock editor had cost the unfortunate ‘dumb buyers’ lots of ruin.
LESSON: DO NOT TRADE STOCKS THAT ARE PUMPED BY THE TV NETWORKS AS GUESTS ON ANOTHER SIDE OF THE TV SHOWS ARE TRYING TO PUSH STOCKS THAT THEY ALREADY OWN by DUMPING.
MY OWN LESSON: Before I was persuaded to take lessons as an online trader by my Lao Shi-Fu, which was about the Fall of 2005, I suffered a big drawdown. The call for more capital by ChinaAOil was disguised from the public about what was then big trouble brewing in the company. With hindsight now, I was trading with no money or risk management, relying only on hearsay in the media. Now with every trade I take, the instrument has gone through some kind of filter ie technical analysis with a trading plan. Upon entry, I put in my stop loss , in addition to working out my target and risk reward ratio.
CONCLUSION: CAVEAT EMPTOR.
This concludes my brief against irresponsible stock editors on TV.
Humanities 