Today I want to take some time to write a quick blog post on a phenomenon that has existed for decades but has amplified lately with the internet and cheap advertising.
I’m talking about those so-called free stock pick services. Also known as free stock alerts, penny stock alerts, free stock pickers etc.
These guys usually set up simple websites and ask you to enter your email address and sometimes phone number so you can receive free stock picks and alerts for cheap stocks that supposedly multiply in value in days.
Many people fall for this type of easy scam because it’s free. They think that his service has nothing to gain by lying to them because it’s free, they don’t make any revenue from that.
Well if that’s really the case then ask yourself this questions: why would the person behind all this go through the effort of set up this service and then pay money to Google or Facebook to advertise it to you if they have absolutely nothing to gain from it.
No, it is not out of the kindness of their hearts.
These are actually good old stock pumpers. If you don’t know what stock pumping is then take a look at this Investopedia article.
Basically, these people (they usually operate in small groups) set up hundreds of phony sites like that with the purpose of collecting addresses and phone numbers of as many people as possible.
They will then find a low-float and easily manipulated stock, buy thousands of shares for themselves and then blast emails and text messages to their huge databases of traders urging them to buy this stock.
Then hundreds of thousands of traders buy this low float stock, artificially causing the price to rise. That’s the pumping part.
Then the people who started this whole thing will sell their shares after the price has risen high enough, booking a nice easy profit.
Only AFTER they sell will they then issue or a sell alert to their thousands of subscribers. The dumping part. This will cause a bloodbath of thousands of traders trying to sell their shares as the price comes crashing down from all these shares being sold within minutes.
It’s basically just a classic by-the-book case of stock pumping. The majority of traders who follow these types of free stock picks will lose and they will likely lose big.
Avoid them like the plague.
Focus on developing your own strategy or follow stock picks from reputable, paid services that have no incentive to manipulate stock prices in order to make money.