Pump and Dump Trading Strategy

Whether you bought a cryptocurrency that then crashed or you bought a stock that skyrocketed in value, but you didn’t manage to get out in time and make great money, then you’ve come to the right place. Today, were are here to talk about the good old pump and dump. Today, we’re going to teach you a great pump and dump trading strategy. We’ll also talk about how pump and dumps occur, how to spot them, and how to trade them too. Let’s get to it and teach you an awesome pump and dump trading strategy that will put money in your pockets.

What is a Pump and Dump?

a pump and dump is a phenomenon that happens in the market when the price of an asset increases exponentially and gains huge attention on a massive scale, which is then dumped later on as the price crashes. In other words, and asset experience is a huge buy, and then a massive sell off.

Now, the fact of the matter is that technically speaking, pump and dump schemes are somewhat illegal, but it really doesn’t matter because they happen all the time. pumps and dumps happen in all timeframes in all markets, and they happen with or without media coverage. It really doesn’t matter if they are illegal, because they happen all the time.

The problem is that tons of newbie traders will fall for a pump and dump scheme by getting too excited about it and then buying too much. Those traders then often get trapped when they buy too much and don’t sell off in time. Sure, if you sell in time, you can make a whole lot of money. However, if you don’t get out in time you will lose it all.

Should You Stay Away From Pumps and Dumps?

The fact of the matter is that if you trade smart, you don’t have to avoid a pump and dump scheme. You can indeed take advantage of these schemes and make profits from them. In the next sections, I’m going to teach you how to identify them, how to trade them, and how to make money from them.

How to Identify a Pump and Dump

Keep in mind that we said that pump and dump schemes happen on all timeframes in all markets. In terms of being able to find a pump and dump, you should find a daily timeframe that won’t affect your responsibilities. In other words, you want to pick a market and a time frame that you can be consistent on in the long run.

One of the best ways to spot a pump and dump is by using the third slope strategy, which is done using a trendline with a charting tool. What you want to do is to connect all of the lows using a trendline tool and then wait for a third slope to appear from its lows. If you see one of these strong slopes, then the pump has already started.

Another strategy for identifying a pump and dump is to use a moving average. Here you want to use an 8 period moving average and a twenty period moving average, and you want to see the price above both of those moving averages. You want to use a tight moving average. So you can spot potential fast moving prices. There could however be a lot of signals from choppy or irregular markets. The bottom line is that you want to be objective.

Making Money from Pumps & Dumps

Let’s get right to it and talk about a complete strategy that will allow you to make money from a pump and dump scheme. Before we do however, make sure that you are doing backtesting, that you don’t fall into the hype, and that you engage in proper risk management.

Now, as mentioned before, to identify a pump and dump, you want to see that it makes a third slope on the trendline, or is above both the eight and 20 moving averages. Now, you might be asking why you shouldn’t buy on pullbacks. Well the reason for this is because you are dealing with extremely volatile markets and that they can crash at anytime.

You want to wait for add confirmation by waiting for a breakout to happen and for a candle to close. You can then enter the trade when the next candle opens. Now, if you are using a longer time frame, but the market structure is unclear, then a better method is to use a much shorter time frame.

Of course, you do now need to know how to exit a trade in order to make money from a pump and dump. Well, I never go to some forum or rely on someone else’s opinion for this information. You don’t want information when people are emotionally attached to the trades that they are currently hyping.

Most people would tell you to keep holding onto your losses so that they can make more money before they dump. One of the best ways to make money from a pump and dump like this is to use a trailing stop loss by waiting for the price to close below the 20 period moving average. you may also use a previous candle close trailing stop loss to exit your trades.

The fact of the matter is that you do not want to have a fixed target profit here. You can’t ever know how high a pump is going to go until it gets there. Just stay with your trade until the price reaches the maximum, look for the first sign of a pullback, and then get out. Hence why it is called a dump.

Now, what you do need to know here is that trading a pump and dump is very high risk, but if you manage to get it right, you can use a whole lot of money. You want to engage in proper risk management and you definitely don’t want to use huge amounts of leverage either.

The Pump & Dump Trading Strategy

At the end of the day as long as you use either the moving average strategy or the trend slope strategy, you should be able to spot a pump and dump. Then, using a trailing stop loss, you can easily get out, AKA dump, before the price crashes. This is how you make money with a pump and dump scheme without losing everything.

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