The following are examples of market-making strategies for investors.
Pump and dump.
A pump-and-dump scheme is a market making scheme by which a company issues a company stock in its own name. The stock being issued is called a “buy” and the trading is done in the open market. A dump is the same except the buyer doesn’t buy the security and pays the company in the open market. A good buy can be a very good stock at an attractive price, whereas a good dump will be very good stock at a very attractive price. The investor who invests in this type of “sell” will usually profit from his purchases but not necessarily from his dumps.
Investors who are involved in this type of trade have to look at the financial statements of the company. For example, to know whether a company is making enough money to make it attractive investments, the stock market must be up to date. Similarly, if a company’s financial statements are a total mess, it’s possible the company is losing money on each trade. And, most companies make only a few millions of dollars every year and will have a lousy company financial statement.
But, if the stock value increases over time, investors find the possibility of great profits a great reward. It’s almost impossible to make a good buying and selling decision when the market is so volatile. The risk is that even though investors want to bet against a good stock, they have little incentive to do so with mediocre ones.
A falling stock is a great stock to buy. A falling stock has a huge upside. It usually moves in the opposite direction of the broader market. A falling stock may be trading at just above a certain price or it may fall below that price. For example, if a company is trading for $35 on the open market, even if the stock prices fall to $20 for a week or two, it’s still a great buy. Investors who are considering buying these companies have to factor in the possibility that the stocks may fall to anywhere from $50 to $100 per share. However, a falling stock isn’t so risky if the company’s shares actually move in the same direction as the market.
Some factors to consider about falling stocks include:
Why are investors buying these stocks? It’s possible some investors are looking for a quick and cheap way to make money in a bull market. The price that a stock trades could fall.
swing trading stocks june 2020, best volume indicator for swing trading, swing trading strategy with bollinger bands, swing trading strategy, swing trading forex price action