Stock Scam - A Simple Main Article On Why You Should Care And What To Do

Stock scams, also called investment scams and securities fraud, is an unscrupulous practice in the stock markets which leads investors to make unwise purchase or sell decisions based on false information, often in violation of federal securities laws, causing huge financial losses. These practices usually prey on beginner investors who are unaware of the risks associated with buying and selling stock. Because of these people's lack of knowledge and understanding, they are easily lured into the hands of those wishing to exploit their capital. The unscrupulous stock brokers who facilitate these activities make use of underhand tactics and fraudulent practices to dupe novice investors and extract illicit gains from them. The key players in this kind of business are the fraudulent broker or salesperson, the investor, the brokerage firm and the stockbroker or dealer who facilitate the transaction.

One such prominent scam is the "Penny stock scams". Penny stock scams are very common and often emerge when a company making an important announcement decides to list its stock for sale to the public through an Initial Public Offering (IPO). In these scams, people believe that they can obtain a large amount of buying power without actually having done any work or research. They fall for the ruse that a company with no track record or significant assets will suddenly become a strong player in the market and be able to raise large sums of money. The "Penny stock scam" thrives on the fact that most people do not have the resources or experience to determine whether the company is legitimate or not.

Another type of penny stock scam is the "Chop-Socks" scams. These scams are run by organized crime syndicates. An organized crime group executes a chop stock operation in which they acquire a stock that has dropped in price, then unload it at a much higher price in hopes of making a huge profit. For this reason, these types of scams usually end in tragedy. Chop stocks are also susceptible to being manipulated by high-level insiders within the investment firm or brokerage in which they are created.

Lastly, another type of penny stock fraud is the "pump and dump" scheme. This scheme is extremely popular with traders who do not have the resources or experience to stay on top of constantly evolving trends. Essentially, these criminals use fake stock trades to look like they are making significant profits, then unload all of their stocks simultaneously in one transaction leaving other investors out big money. Because of the volatility of the penny stock prophet market, these criminals are able to get away with it because other investors will lack the resources to stop the crime.

To prevent being scammed, and to guard against organizations and brokers that engage in securities fraud, you should invest in a comprehensive educational resource which teaches you how to spot fraudulent trades. You should also become familiar with technical analysis, because it will allow you to distinguish between highly volatile securities and those which are more stable. Finally, make sure that you check your financial reports on a regular basis to be on the lookout for things like stock trades which are listed but not publicly traded.

There are many more types of stock scams. In this main article, we've focused on two of the most common types: pump and dump and bogus micro cap stock scams. Other types of scams include "traction marketing" schemes, and even outright investment fraud. It's important that if you become a victim of stock price manipulation or fraud that you report the matter to the appropriate authorities. Don't wait until it's too late. Stop it right now!