Pump and dump - I think there is a very simple way of avoiding it. Just do our own research... which means we are not chasing something which we should not. This will also help if we make or lose money as Either way we will be ready to take the responsibility which means we will push ourselves hard enough to spend sometime to protect our own capital. IMO once we can figure out a way how to protect our own capital, I think it will help to make profits...
Pumps are high risk enteries and even when they are not high risk, we won't know if we have done our research. For example, FBR many thought pump came in as escrow stock was coming out... and then bang it just made another few bags after the escrow stock hit the market. On the other hand, entery price is also important and IMO if some one do their home work they can time their entry well which also means we are set before the pump starts and can actually off load before the dump starts. Hard to do, right?
Small caps run for different reasons and it would be hard for us to mention them all... perhaps a separate weekend topic? however, most of them have one common reason.... they happen to be at right place right time. The story looks the best in the world and then stock starts running. Lets say a certain stock is about to drill the most exciting target... stocks runs based on anticipation, they hit the target and its a success. It quite often means stock will run another 100% plus. Then they drill adjacent targets and they turn out to be fairly average now this means stock will lose most of the gains plus some. The other scenario is, the target turns out to be dud. Its a free fall all the way down to new lows... this is why some say take the profits as we go along rather than blaming pump and dump later on... if you can't beat them join them IMO... but no one knows for sure whether something is simply a pump and dump or its real and offers few more bags? No one can be certain so take profits IMO
The third scenario is why I invest and most punters do invest in small caps... I need to warn everyone regardless this is a 99% plus failure... small caps go and drill... and they hit it big and then they keep hitting... stock keeps going and going and going... this scenario is based on dreams and hopes coming true... but why would you wait for less than 1% chance of success and 99% chance of failure? Even in this scenario, it does not hurt to take profits... you make profit and leave the party early won't hurt that much as compared to holding a dead cause....
By saying all this, if we keep doing research we can reach to a stage where we make a decision after analysing many things and perhaps our successful decisions will take over our bad decisions. We will still make wrong decisions for sure but our right calls will not only look after the wrong calls but will make us prpfits as well.
With all honesty, no trader/investor can reach to this stage without doing their own research. So I would say lets focus, work hard and be professional towards trading/investing rather than taking it as a hobby and something which we do to keep our blood rushing... and if we can't research, lets just avoid stocks tbh.
