Seen a share Pump and Dump?

Ever heard the phrase "pump and dump" and wondered what it is? Well, the next time you see a price spike on your watchlist, take a more sceptical picture of what's going on. As penny shares are often the target of fraudulent activity, it helps to recognise the patterns to avoid costly mistakes.

Simply put, the "pump" refers to hype created to artificially inflate the price of a share. The "dump" is when those who created the hype (and of course picked up a large quantity of shares beforehand) sell out. The result of the shares being sold or "dumped" on the market is a drastic price drop. Suppose you bought shares at the peak of this hype when the price spiked expecting them to go up. Within a day or two you could be reaching for another tissue, waving a tearful goodbuy to your investment with a huge drop in price that continues to go south for months to come. Whilst a sharp jump in price might appear a good indicator of things to come, remember to take a step back and decide if you're looking at just another pump and dump.

Here's a video by StockJock-e I enjoyed that sums things up and gives you the idea.