Timothy Sykes is a fantastically successful blogger, penny stock trader, and educator. He makes a living by teaching people how to recognize “pump and dump” schemes by penny stock promoters… and then short those stocks for a profit. They make money when the price of the stock they’ve shorted goes down… which is inevitable if you can identify a stock that is all hype and no substance.
What is a pump & dump? Essentially the promoters of a virtually worthless stock (worthless, because the company is a sham of some sort) do mass mailings of marketing materials. This is the pump. They hype a company with false and misleading information, hoping to interest people in buying the stock (taking long positions). As those people start buying up shares, the price of the stock rises rapidly. While this is happening, people who previously held the stock start selling (at an inflated price, thanks to the all the buying activity generated by their hype). This is the dump. The people selling make a ton of money on their stock. Read More