Over the past decade, millions of dollars have been lost through stock market scams. Scams on the stock market take many forms. This article will discuss five common scams and what you can do to avoid them.
The five most common types of stock market scams are employee flipping, high-pressure sales techniques, spamming the stock market, poor trading strategies, and insider trading.
Employee Flipping: One of the most common employee flipping scams involves employees leaving the company to go work for their new employer. They get paid a lower salary but are under more control than they were with the company. The new employer will then sell the employee’s stock at a higher price than they paid for it. The investor in the stock is likely to make a lot of money from this type of stock market scam.
High-Pressure Sales Techniques: Some traders and investors have made great fortunes by making money with high-pressure sales techniques on the stock market. Their techniques are extremely successful at building up their name in the business. These types of stock market scams take advantage of others who are in dire need of a way out and are willing to believe anything.
Spamming the Stock Market: Spamming the stock market can be a tricky thing to do. It’s important to research the stock you are investing in and make sure it is a legitimate company. Also, make sure that you do your research on any company you’re considering investing in. The company needs to have sound financial statements, a proven track record, and a good reputation. If the company you’re considering invests in products or services that you don’t believe in, then it probably isn’t worth investing in.
Poor Trading Strategies: Poor trading strategies include short selling and other activities that will not get you rich in the stock market. Be careful of what you invest in. A legitimate company has a solid track record and a solid financial situation.
Insider Trading: Insider trading can be one of the most dangerous stock market scams of all. Insider trading involves someone who has inside information on a company’s management and how it operates.
Another person gets the inside information before the company has time to tell anyone and starts buying shares of the company. When that happens, the company’s share price goes up because the investor is profiting off of its success.
The type of person involved in this type of investment fraud will often make the majority of their money off of the purchase of stock that he or she bought at an artificially low price. Insider trading is illegal and usually doesn’t work. It also takes a lot of money to have a company to develop this type of vulnerability.
The best way to avoid the stock market scams is to do your homework. Look for companies that are on a solid financial footing, reputable businesses, and fair companies. If you have to take a chance on something, do it safely.
You have the most to lose if you invest in a company that has been victimized by one of the stock market scams discussed in this article. Also, be wary of companies that you see advertised as “for-profit stock brokerages.” These are also signs that you’re being taken advantage of by the company.