One of the biggest issues any investor has to face is that of the pump and dump scam.
In the world of pennies stocks and pink sheets, pump and dump scams are fairly common, but there is also a lot of regulation to prevent such things.
The crypto community has no such protection and despite the pump and dump scam problem, regulation is still not something most people involved with cryptocurrency are willing to accept.
Pump and dump is the practice of artificially inflating the price of a coin and building hype around a coin, and then when the coin reaches a certain price, the person or people involved with pumping the coin, dump it on everyone else.
There are generally three types of pump and dump coins. Today, I am going to talk about the first of those three, the investor pump and dump scam.
Investor Pump and Dumps
Investor pump and dumps are the easiest of all pump and dumps to spot.
An investor pump and dump is usually performed by someone who has a considerable amount of buying power. Usually this type of pump is done via bot trading with multiple accounts.
The chart for an investor based pump and dump is fairly simple to see. It is usually a coin with low value. Typically, though not always, the coin has a value under 0.00001000 BTC.
You can spot the pump because the chart will have a series of tiny trades, followed by a larger increase, followed by a series of tiny trades, and again a larger increase.
Whats actually happening is an investor is going out and making a tons of small buys. They do a series of small buys because its harder to see one person is making all the buys vs if they buy a large bulk of coins at once.
These trades are almost always automated.
The larger increases are what happens when the investor pumps the coin. The investor will promote the coin and get others to invest.
The idea is that by doing smaller buys and smaller pumps, the pump and dump will go unnoticed and thus be a success.
If you can spot an investor pump and dump its very easy to profit from, as long as you don't get greedy about it. In fact you can make a considerable amount if you can spot this pumps happening.
As suggested above, the first thing you need to do is check the charts of a coin before you invest. If you see signs of a potential pump, the next thing to do is check the price of the coin.
If the price is to high, do not engage in investing. It likely means the coin has been pumped for a while and could be dumped at any second.
Its best to avoid coins whose value is above 0.00001000 if you notice a pump happening.
Realtime Charts of a pump and dump
If you do find the right coin, the next thing to do is look at the realtime charts.
The realtime charts of a pump and dump tell us everything.
A coin that is being primed for a pump and dump, has some very unusual patterns to it.
First you will notice some activity on the right hand side of the charts, the "ask" charts.
You will see the price very slowly shifts higher and high, and coins seem to get shifted through various wallets at various prices.
Slowly the wallets from lower columns will be shifted to match within a few coins the upper columns until all the coins are a close proximity to the top listed column.
That is to say if a coin starts off showing a top column of .00000200 per coin, and then you see it shift to .00000220, then all the columns under it start to increase in value to match.
Then a pause happens. It usually lasts about 30 seconds to a minute.
Suddenly the left hand column starts doing the same and you notice a couple buys from the right hand column take place.
All the coins from the left hand column shift and then another pause.
This time perhaps the coins are shifted down instead of up, still back and forth it goes.
This mixed with charts as shown at the top of the article, is a good the sign of automated pumps taking place. A couple accounts are being used to maintain the values and the levels, and to make it appear as if real trades are taking place to get others to buy.
Profiting from Investor Pump and Dumps
If you find a coin that has all the right chart signals and all the right realtime signals there are a lot of profits to be made, as long as you don't get greedy about it.
The trick is to find these coins and never buy more than .003 BTC worth.
Lets say you purchase 1000 of a coin you find being pumped. Next what you should do, is instantly set the sell price for 90% at a value of 110% what you paid.
If the coin is still low in value, what you will find is the coin will slowly be shifted to a 100% increase, without anyone noticing, and then it will shift back down again, and back up, and back down.
It will do this over and over during a pump, so if you get in early enough and don't get greedy what you will find happens is that you slowly build up a coin, while never actually spending on the coin.
If we did this three times using my above example, I now have 300 free coins, because each time I would be buying 1000 and each time I would be selling 900 for my break even price.
If enough of a coin can be collected this way before a dump happens, then when the dump happens it doesn't matter how slow or fast it drops in value, because your coins end up being 100% profit no matter the value.
If you are playing it safe and not spending more than .003 bitcoins whening buying pumped coins, then the worst case scenario is that you lose $10 or $20.
If you know a thing or two about statistics, you will know that if you do this with 10 or so coins at the same time, you will likely make more than you will lose even when you lose.
You can also mix this with more advanced practices of using signal bots to spot various coin activities to maximize profits with this technique.
This technique is not for the faint of heart. Many people have lost lots of money trying to predict and play pump and dumps. Pump and dumps truly are one of the biggest downfalls to an unregulated currency system.
Today my coin picks for you are Sequence (SEQ) and Gambit (GAM). SEQ is a duality blockchain heavily integrated with the medical industry trying to use BaaS (blockchain as a service). GAM is coin based on a group of private traders, their earnings, their affiliate promotions and many other things.