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Avoid Getting Caught in Pumps-and-Dumps!


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#1 sdf

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Posted 13 October 2013 - 11:20 PM

Text pasted from my article here: http://josephshanaha...mpanddumps.html

 

Two Simple Rules to Spot (and Exploit) Pump-and-Dumps!


Taking a look at the charts at mcxNOW or cryptocoincharts, you can quickly see patterns which resemble the classic pump-and-dump. Here's how to make some money during the frenzy!

The alternative cryptocurrency market (altcoins for short) is rife with what predatory traders make their living off of: pump-and-dumps. If you've ever bought an altcoin on the advice, news, or analysis of someone you don't know very well, there's a good chance that the price quickly dove below what you just paid for it. Why is that?

You likely fell victim to a pump-and-dump, which is a manipulation of the price of a coin based on shaky news, orderbook wizardry, or a big owner taking a payout. Don't worry- it has happened to all of us, even though most people won't admit it. In fact, most traders love seeing the early signs of a pump-and-dump, or even go out of their way to manufacture one themselves to make money off of you!

So, how do you make money in a market that might be rigged against you? Here's a list of tips and rules I follow when buying a coin:
 

Rule 1: "A coin is as strong as its development team".


This rule is so amazingly true that it defies all technical analysis ever made. This is because altcoins are a bit like stocks: you have to trust that the leadership and community supporting a coin are constantly thinking of new services and code to make a coin more useful compared to others.

Take for example Litecoin, a coin that in my opinion is not scarce, not fast, and no longer "innovative". There are hundreds of thousands of Litecoin made each day, which requires many new traders to support the current price. The blocks are slow compared to WorldCoin or MinCoin, which safely support block times of 30 seconds to 1 minute. And the only major innovation the development team offered- the scrypt algorithm- has been copied by tens of other coins. Further, the development team have publically asked for money to continue to develop the coin. This sounds incredibly weak to me.

So, if you see an upward movement on Litecoin, be wary! What is the news that spurred the buying? Is it a new service that is coming out (fiat exchange? TOR marketplace?)? Is a new big buyer (a "whale") buying coins? If you buy on the uptick, the people selling to you are likely taking a profit. If too many people decide to take a profit, you will be left "holding the bag", i.e., the overpriced coins you just bought!!!!
 

Rule 2: "Buy on silence, sell on rumor, buy again on delivery".

In this market, there is no news. There is only silence, speculation, and the actual delivery of a service. Those who buy on silence stand to make the most gain, because they are risking the most money without any indication anything positive is planned for the coin.

Then, when a new idea is proposed to the community as "news", people will quickly start buying. The classic example we all know is "Litecoin will be on Mt. Gox soon!". Every LiteCoin pump revolves around this, almost like a joke. And yet new buyers continue to lose money on it, because the rumors never materialize.

If Litecoin ever does end up on Mt. Gox, however, it would be wise to buy. Once a service is delivered, the person providing that services has the intention of keeping it going. This is because it makes him money- and gives him recognition.

So there you have it! Two simple rules that you should always follow when considering buying a coin during a high volume frenzy. Sometimes it is better to miss the boat than hold the bag. If you aren't confident in spotting high and low prices, it is better to get in on the bottom through the above scouting tips.


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#2 CC66

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Posted 15 October 2013 - 09:01 PM

I like this post.  I'd like to put togethor a thread for noob traders explaining how not to get caught up in the trollbox manipulation lol



#3 sdf

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Posted 16 October 2013 - 08:11 AM

I like this post.  I'd like to put togethor a thread for noob traders explaining how not to get caught up in the trollbox manipulation lol

 

Let me know if you would like to collaborate as I have just earned 4 days off from work :)



#4 dacm4n

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Posted 16 October 2013 - 02:21 PM

I like this post.  I'd like to put togethor a thread for noob traders explaining how not to get caught up in the trollbox manipulation lol

Yea I see them getting burned all the time lol.



#5 zhinkk

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Posted 16 October 2013 - 03:01 PM

Thanks for posting this thread. Honestly, one of my main rules is to never follow what someone tells you to buy/sell, no matter how respected they are in the community. It's a market. Everyone is competing against each other (in concept, but I have seen people work together).



#6 necom

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Posted 17 October 2013 - 05:40 AM

Yeah, great post, Joseph.  Great info here.

 

I like this post.  I'd like to put togethor a thread for noob traders explaining how not to get caught up in the trollbox manipulation lol

I think this is a really good idea too.  People get so caught up in what's going on in chat and they really lose their minds a bit.  It's often sad to see, since you know there are many new traders losing out and maybe getting turned off to trading altogether.

 

...that said, tough lessons are often the best ones, especially when money is involved.  Many people say that a person needs to get hit with a loss to really learn how serious things are.



#7 sdf

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Posted 17 October 2013 - 12:46 PM

Thanks for the input guys! Feel free to use any of this information to make more content for new users. I think it's no coincidence that Mincoin has already returned to its value a few days ago while other coins are down 100%. It shows where the pumps and dumps are...



#8 clamps

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Posted 19 October 2013 - 04:11 AM

I hope this info helps me , thx



#9 Neutral-Neet

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Posted 20 October 2013 - 03:45 PM

Good manual to this life of exchanges haha 



#10 jellyfish420

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Posted 28 October 2013 - 02:20 AM

i just read this the other day in someones blog...was that yours?

i get caught in the pump and dump everytime! i'm done trying for now....i'm just hoarding everything now



#11 sdf

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Posted 28 October 2013 - 06:41 PM

i just read this the other day in someones blog...was that yours?

i get caught in the pump and dump everytime! i'm done trying for now....i'm just hoarding everything now

 

Yup should be mine! I publish everything under my own name, but I think some people also repost my writings as well.

 

Unfortunately, some people acting on my advice last week bought MNC above 002 and I feel a bit bad, but it was impossible for me to predict the BTC explosion. Plus, MNC is worth more today in fiat terms than it was last week, so I still wasn't wrong at least :)



#12 Huntery

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Posted 29 October 2013 - 08:23 AM

amazing article joseph, up!


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#13 sdf

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Posted 29 October 2013 - 09:22 AM

amazing article joseph, up!

 

Please be sure to share it with whoever you want and ask me if you want to collaborate in some way :D



#14 Huntery

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Posted 29 October 2013 - 06:53 PM

I'll spread the word \o/



#15 ssj4mo

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Posted 29 October 2013 - 10:05 PM

Very well said.  You're clearly not only intelligent in maths and fundamental economics, but you are clearly doing your research in the field.  I've read some of the posts on your website as well, but this is a very good read for "average" miners and traders that have just "jumped onto the altcoin wagon" lol

 

Great post.  Just like trading stocks or "real" currencies, very few people actually get "relevant" news in time to do anything meaningful with it.  The people privy to such information immediately are controlling large stakes of coins.  The average person can't rely on news.  They need to do research, read charts, and try to anticipate long-term changes and hedge their bets long term.  To be an altcoin "day-trader", you'd need to be on the computer all day long, in dozens of IRC channels, watching real time stats, writing custom software to analyze profitability (instead of using sites like coinchoose), and, of course, get some money together to build a decent mining rig.

 

Since I've, "got back in the game", I've been spending an hour or so daily researching the actual difficulty and exchange rate fluctuations and putting what I consider relevant into a SQL database I wrote.  I spend a few hours a week writing the software I plan to use in the future to help me determine not only what to mine, but what to buy/sell/trade and at what values on the various exchanges.  It's a tedious project, but it's a project that's fun for me not only as a programmer, but as a crypto currency lover.






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