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Sunday, 22 March 2020

How Pump and dump works in market

A friend just shared with me this stock market story

A lot of monkeys lives near a village.
One day a merchant came to the village to buy these monkeys!
He announced that he will buy the monkeys @ $100 each.
The villagers thought that this man is mad.
They thought how can somebody buy stray monkeys at $100 each?
Still, some people caught some monkeys and gave it to this merchant and he gave $100 for each monkey.

This news spread like wildfire and people caught monkeys and sold it to the merchant.
After a few days, the merchant announced that he will buy monkeys @ 200 each.
The lazy villagers also ran around to catch the remaining monkeys!
They sold the remaining monkeys @ 200 each.
Then the merchant announced that he will buy monkeys @ 500 each!

The villagers start to lose sleep! ... They caught six or seven monkeys, which was all that was left and got 500 each.

The villagers were waiting anxiously for the next announcement.
Then the merchant announced that he is going home for a week. And when he returns, he will buy monkeys @ 1000 each!


He asked his employee to take care of the monkeys he bought. He was alone taking care of all the monkeys in a cage.
The merchant went home.

The villagers were very sad as there were no more monkeys left for them to sell it at $1000 each.☹

Then the employee told them that he will sell some monkeys @ 700 each secretly.
This news spread like fire. Since the merchant buys monkey @ 1000 each, there is a 300 profit for each monkey.
The next day, villagers made a queue near the monkey cage.
The employee sold all the monkeys at 700 each. The rich bought monkeys in big lots. The poor borrowed money from money lenders and also bought monkeys!

The villagers took care of their monkeys & waited for the merchant to return.
But nobody came! ... Then they ran to the employee...
But he has already left too !
The villagers then realised that they have bought the useless stray monkeys @ 700 each and unable to sell them!

It made a lot of people bankrupt and a few people filthy rich in this monkey business.
That's how the pump and dump works. Be careful about what you are buying. This happen in many stocks in past.

Hope this will help...

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