So, we are all afraid of being caught on the wrong side of a Pump and Dump scheme and buying in near the top only to lose almost all our money when everything eventually tanks. I will attempt to explain how to deal with things if you get caught up in one, and how to spot common strategies. It is highly advised you watch the video at the end of the segment to get visual representations of what I am talking about.
A common strategy pumpers will attempt to use is to buy repeatedly small amounts of a coin over a small time period. This is usually done in micro crypto currencies. Buy in 10 cents worth of a certain coin over and over again, makes it look like there are many people buying the coin and can get other people to buy larger amounts of the coin, therefore pumping the price higher. This strategy is also used sometimes to tank a coin by selling small amounts of coin over and over again to make it look like everyone is selling to trigger a cascade so the dumper can buy in later at a much later price and profit. If you spot this, just hold on tight because after the pump or dump is over, the price of a coin usually returns to what it normally was.
If you see a small coin suddenly spike up in price and the overall market is pretty much still, you should first check to see if there is any news about that coin. If there is not, then someone is probably pumping. Do not buy when the price is already going up because at some point that you cannot guess, they will start to dump and you will lose money. If you do impulse buy and then you suspect someone is pumping a coin, then use the “20%” rule to secure gains and limit losses. Basically if the coin moves either way by 20% of your buy in price and you suspect a pump and dump, sell immediately. If its being pumped, you’ve just gained 20%. Yes, you may not gain the 150% that would be possible but you still made money and you don’t risk losing it when people start dumping. If it goes down by 20%, then you know that the dumping has started and you want to get rid of it before any more losses occur.
Using these simple methods, you can:
a) Spot a pump and dump and not get involved
b) Get out while either securing and small gain or limiting yourself to a small loss