Every market has people who try to profit by misleading others. Knowing the common traps helps you protect your money, whether you trade the Pakistan Stock Exchange, crypto or anything else.
Pump and dump
In a pump and dump, a group buys a low-priced, thinly traded share or coin, then promotes it heavily through social media, WhatsApp groups or “tips”. As new buyers rush in and the price jumps, the group sells (dumps) its holdings, and the price collapses, leaving late buyers with losses.
Warning signs:
- A sudden price spike in a small, little-known company or coin, with no clear news
- Messages urging you to “buy now before it’s too late”
- Promises of guaranteed or very large returns
Insider trading
Insider trading means trading on important information that has not been made public, such as upcoming results or a deal, usually by people close to the company. It is illegal under securities laws in Pakistan and most other countries, and it puts ordinary investors at an unfair disadvantage.
Fake news and rumours
False stories about mergers, results or government decisions can move prices before they are disproved. Always check announcements at their official source, such as the company’s filings on the PSX website, before acting on news.
Misleading results
Results can sometimes be presented in a way that looks better than the real picture. Look at trends over several periods rather than one headline figure.
How to protect yourself
- Be very cautious with tips from strangers or groups
- Avoid very illiquid shares and coins
- Always use a stop loss and sensible position sizes
- Remember that regulation today is stricter than in the past, and suspicious activity can be reported to the regulator
Want to go beyond the basics?
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- Techniques you can apply to the Pakistan Stock Exchange, crypto, forex and other live markets
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This article is for education only and is not investment advice. Trading shares, cryptocurrencies, forex and other markets involves risk, including the loss of capital.