Warning on shares gamble, page-2

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    Bucketing

    Where, in an attempt to make a short-term profit, a broker confirms an order to a client without actually executing it.

    A brokerage which engages in unscrupulous activities such as bucketing is often referred to as a "bucket shop".

    If the eventual price that the order was executed at was higher than the price available when the order was submitted, the customer would simply pay the higher price. On the other hand, if the execution price were lower than the price available when the order was submitted, the customer would pay the higher price, and the brokerage firm would pocket the difference.


    Circular Trading

    A fraudulent trading scheme where sell orders are entered by a broker who knows that offsetting buy orders for the same number of shares at the same time and for the same price either have been or will be entered.

    These trades do not represent a real change in the beneficial ownership of the security.


    Churning

    An unethical practice employed by some brokers to increase their commissions by excessively trading in a client's account. This practice violates the NASD Fair Practice Rules.

    In the context of the stock market, churning refers to a period of heavy trading with few sustained price trends and little movement in stock market indexes.

    Another negative result for the client is being stuck with higher tax bills.


    Front Running

    An unethical broker practice where they trade an equity in response to information from their analysis department before their clients have been given the information.

    One example of front running are analysts and brokers that buy up shares in company XYZ just before the brokerage is about to recommended the stock as a strong buy.

    Another example is a broker who buy's himself 200 shares in stock XYZ just before his brokerage was planning to buy a large block of 400,000 shares.


    Pump and Dump

    A highly illegal practice occurring mainly on the Internet where a small group of informed people buy a stock before they recommend it to thousands of investors. The result is a quick spike in the price followed by an equally as quick downfall. The people who have bought the stock early sell off when the price peaks.

    Many pump and dump sites tend to recommend companies that are OTC and have a small float. The small float means more volatility.

    It is virtually impossible to make money from these web sites unless you are the proprietor. The SEC eventually busts all of them.


    Poop and Scoop

    A highly illegal practice occurring mainly on the Internet where a small group of informed people push down a stock by spreading false information and rumors so they can purchase it at bargain prices.

    The opposite of pump and dump.


    Bear Raid

    An illegal practice whereby investors attempt to push the price of a stock lower by taking large short positions and spreading unfavorable rumors and stories about the target firm.

    In a bear raid, the manipulators profit on the difference between the original stock price and the lower (manipulated) price. This was a popular practice in the early 1900s.







 
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