The Dirty Truth About Pump & Dumps — How to Spot Them Before You Get Burned

Pump and dump schemes are one of the most common ways beginners lose money in the stock market — especially with penny stocks and meme stocks. Here’s how it works and how to avoid falling for it.

What Is a Pump and Dump?

A pump and dump is a scam where someone hypes up a stock to drive the price way up (the pump)… then sells all their shares once others start buying (the dump), causing the price to crash.

Real-Life Breakdown:

Pump Phase: People or groups start promoting a small, cheap stock online.
They say things like: “Next 1000x stock!” or “This will make you rich!”
The goal is to create hype and FOMO (fear of missing out).

Dump Phase: As new buyers rush in and the price spikes, the scammers sell their shares at the top — leaving everyone else holding the bag.

Crash: The price drops fast. Most people lose 50–90% of their money in days… or even minutes.

How to Spot a Pump and Dump

What Happens If You Buy In?

• You get in after the hype already started
  
  

• The stock shoots up a little more
  
  

• Then it drops 50–90% fast
  
  

• You’re stuck holding worthless shares
  
  

• The people who pumped it are long gone with your money
  
  

How to Protect Yourself

Do your own research. If you don’t understand what the company does, don’t buy it.

Check the volume and history. If the stock barely moved for months and suddenly spikes, be suspicious.

Ignore hype influencers. TikTok traders, spammy tweets, and Discord shills are usually paid or in on it.

Stick to real companies. Buy businesses with:

• Real products
  
  

• Real revenue
  
  

• Real long-term value
  
  

Avoid trading penny stocks. They’re easy to pump and dump — and hard to get out of once it crashes.

Final Thought

If a stock feels like a lottery ticket, that’s probably all it is.

The people who make real money in the stock market do it slowly, consistently, and by avoiding hype. Don’t be someone else’s exit liquidity.