Glossary Term

Pump n Dump

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Pump and dumps are price manipulation schemes that typically take place in illiquid or thinly-traded markets. This is because it’s relatively easy to move the price of assets that don’t have a great deal of trading volume. Pump and dumps involve initiating a price rally by buying up the asset (thus pumping the price). This is done in the hope that other investors will attempt to profit from the price rise by also buying the asset. Eventually this becomes a kind of self-fulfilling rally as greed sets in and more and people pile into the asset in question. When the price of the asset has risen sufficiently, the parties who initiated the rally in the first place, sell their holdings (dumping the asset they hold) on the open market, unloading them at a new inflated price and causing the price to plummet back down.

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What is pump n dump? A Traders Expert explanation

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