Stock fraud and stock scams have been around as long as the stock market has been. With the invention of the Internet, stock scams have become very prolific and widespread. The scams that are out there are too numerous to name, but a few of the more common ones are easy to spot.

One of the most common scams around is termed the slot machine scam, and this is an old scam that has been around for a while. This scam technique gives as many people as possible a wide variety of penny stocks to choose from. With these odds, someone is bound to get lucky on one of the stocks with a big win. The stock picker looks like a market whiz even though a lot of clients lose on the same scam. Make a broker that you are considering show you a track record that has consistently proven successful repeatedly, not just on one lucky pick out of many.

Another common stock scam is called a pump and dump. Penny stocks are bought in large share amounts, and then the purchaser spreads rumours in chat rooms about a takeover, or they pretend to have inside information and they pump up the value of a stock with no factual basis, then they dump their shares when the price jumps because of the rumours. This scam is not just unethical, it is highly illegal. Despite this fact, this stock scam happens frequently so beware.

One of the most common stock scams is called the selective star scam. A stock picker will publish legitimate winning stocks that they have picked, but the losers for the same time period is conveniently omitted. This makes the person picking the stocks to look like a great market trader, when actually they may have an awful track record. This scam tricks you into believing your stock picking service is terrific, when in fact there are numerous losers for every winner.

Common stock scams are all over the Internet, and by understanding how some of these scams work, you may be able to avoid these scams. The best way to avoid being the victim of an online stock scam is to ask for an honest track record from your stock picker, including losses for the days included, not just the winners. For every winner, there could be fifteen or more losers for that same time period. Purchasing large blocks of stock, spreading rumours to pump up the price, and then selling the stock at the inflated price is called a Pump and Dump. This scam happens way too often, and it is illegal as well as unethical.

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  1. I am not a person that knows a lot about stocks, but I have certainly seen many ads over the years about penny stocks. I have even thought about purchasing some of these stocks hoping to get lucky. This is great advice and warning to those who like me may be looking to get involved in penny stocks to be aware of scam artist. My only criticism is that the first link comes a little too soon for me in the article.

    1. Thanks for sharing your views on my article. I am an investor in the stock market but always keep my self away from these kinds of stock. I always advise investing in A grade companies when the stock is at a low level and wait for a suitable period to get the returns. I am happy that you pointed towards the link, I will keep this in mind while writing the next article. It could be due to the fact that I wanted to share a legit opportunity with my readers so that they can bookmark it for taking action sometime and keep reading, rest of the article.

  2. Thank you so much for this valuable information. My boyfriend just came to me with the nes that he wanted to buy a penny stock diamond mine because he had heard lots of news (from “friends”) saying how it was in a position to to take over some other mines. That you had to invest NOW to make the real money. After reading your article I realize it is a Pump and Dump Scam. I have shown this article to my boyfriend and after a little more investigation he realized that it doesn’t seem on the up and up and will not “invest”. Thank you so for the warning!

    1. Thanks, Heather for visiting my website and sharing your experience. Scammers always device new ways. Many people have been scammed by these pump and dump Scams. In case you are a market-watcher or investor, you might start receiving emails promoting a certain penny stock. It’s never a good idea to follow such advice without actually tracking the past record of the stock and investigating the companies reputation, profit and loss and business details etc.
      If you get the same tip from multiple sources like emails and social media and find stock suddenly start shooting upward, it may raise a red flag. Blasting emails and social media message is a favourite method of Pump and dump scammers.

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