What is Stock Pump?

The word "Pump" in English means "Pumping", respectively, pumping stocks - literally translated as pumping stocks with investors' money. It is considered a scheme of manipulative rate increase in the securities markets, with the prospect of earning income by quickly (less than 1 trading day) increasing the deposit by 50-100% or more.

How is this process carried out?

This mechanism is possible due to the implementation of one or several conditions for increasing the value of the shares selected for the pump:

1) Creation and dissemination of false positive news (This method is often used in relation to companies involved in the extraction of raw materials, by injecting news about the discovery of a large reservoir of valuable minerals or oil).

2) The conspiracy of a large number of investors to buy out the shares of a certain company at the appointed time, which in turn inevitably makes the price of securities rise.

3) Stirring up interest in stocks by spreading information about the imminent injection of significant funds by large investors into any security. Combinations of these methods are often found to increase the expected pump effect.

In fact, a more rational approach for maximum results is the use of popular methods in combination with short-term analysis of global analytical agencies.

Firstly, this method attracts investors outside the circle of collusion, since the picture from the outside seems rational (Analysts provided a technical summary "Actively Buy" and now the stock went up in rapid growth).

Secondly, in the stock market, up to 15% of transactions are carried out by trading robots, they are able to mathematically analyze charts, but they do not know how to understand the context of news (whether it is positive or not), hence the error in trading, and when deviating from the chart robot's plans by more than 1 -1.5%, the car considers this a trend and, in most cases, connects to the pump, joining the ranks of the investors blowing the bubble.

Third, the exchanges themselves (brokers providing services) become advertising platforms for fast-growing stocks. The fact is that within the platforms, the platforms "recommend" what to buy, in separate blocks or filters of fast-growing companies, thereby advertising stocks that show good growth during a trading session - thereby attracting target customers, further accelerating the rocket.

These points play on the psychology of traders and on the algorithms of robots, as reputable analytical agencies summarized "Buy".

Search engine inquiries about Pump Shares spiked due to a sensational story of amateur investors who banded together and began to massively buy back shares of GameStop, as a result of which the share price soared by 708%.

Legally, Pump Shares is not considered a violation if the scheme does not involve insiders from the side of the company whose shares were subjected to this manipulation. 

Johannes Röll

Johannes Röll was born 1978 in Brilon,Germany. Graduated RWTH Aachen University. Over the past ten years he worked as Head of the plastic card team, where he was mainly responsible for the development of the distribution, Head of sales Department and Financial Analyst,where he got experience in planning and support sales figures for branches. For the present he works as freelancer

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