The growing interest in cryptocurrency has positioned digital assets to be one of the most sort after investment types. Good signals enable investors to make important trading decisions and maximize profit. They are rapidly becoming attraction hubs for private investors, taking over stocks and bonds.
According to a survey by Goldman Sachs, 15 percent of family offices around the globe and 25 percent in America have invested in cryptocurrency. Another 45 percent are looking to invest in the future.
High profitability is one of the triggers of growing interest in crypto investments. Trading which is a major aspect of a crypto investment is becoming more popular. So many people are rolling in millions of dollars just by trading cryptocurrency. Though it requires some knowledge and technicalities, expert traders can assist beginners with strategies and trading instructions known as signals.
Crypto signals enable both beginners and advanced investors to maximize trading profits.
Here in this article, you will learn the benefits of using trading signals in crypto investments.
Trading signals can also be a tool for scammers to defraud gullible investors. This happens in a scheme known as pump and dump. It involves manipulation to make more people buy a particular vehicle or digital assets by artificially inflating the prices and spreading wrong information. The aim is to push up the demand and price of the assets, sell off their own at a good price and dump the price. Inexperienced investors who bought more assets at the pump price will lose their funds when the price falls.
Sometimes the misleading information to pump asset price is sent as trading signals by fake providers. To avoid falling victim to fake crypto trading signals you need to learn how to identify genuine providers.
It’s also important that you learn how to choose the best crypto trading signals.
How to Identify Genuine Trading Signals
Crypto trading signals are the result of long analytical research by experts. It’s important for every trader to have some winning strategies which could be in the form of trading signals. They are insider information showing future changes in prices of certain coins and analysis of the cryptocurrency market. This information should be trusted and reliable since it is taken from expert traders in the stock and crypto market. Here are a few yardsticks to measure the authenticity of any trading signals.
Source of Signal
The most important aspect of having trading signals is authenticity which largely depends on the source. You may want to consider a source before choosing a crypto trading signal. There are many sources to choose from, sometimes traders use the services of special bots, programs, or websites. Some professional services show only the current analytical information with analysis of existing trends. Using Bots and programs could be reliable since they provide current information from different sources at the same time.
Quality of Signal
Experts spend a long time researching work hard to generate signals, a genuine trading strategy should cost some money. Crypto professionals are not ready to give away their groundwork without getting anything in return. However there’s no 100 percent guarantee on the reliability of any paid trading signal, not all paid signals offer quality information, even the most reliable ones are not error-provided. To be on the safe side, read reviews that show the advantages and disadvantages of signals.
How to Identify Fake Trading Signals
There are so many unreliable signal services out to swindle gullible investors. Some of these signals are not identical; they carry a variety of information on what to buy and market performances. Some are just a chunk of misleading information.
Some Fake Trading Signals Are Associated With Pump And Dump
The crypto market is extremely prone to price scams due to unclear rules and regulations that are difficult for regulators to enforce. Low-performing crypto assets are the main target for the scammers who plot to swindle investors.
As earlier stated in this guide, fake crypto trading signals are generated through pump and dump. It’s a scam that involves artificially inflating a price of an asset through fake and sugar-coated misleading information.
How to Identify Pump And Dump Work?
Knowing how to identify pumps and dump will help you avoid getting involved with fake trading signals. Though it is not a new scheme in the crypto space a lot of people do not have a good understanding of it. The idea is that a group or a person buys into a thinly traded asset when its price is low. Then they start spreading positive news about the asset which is most times fake.
More investors will buy the assets because they believe the price will appreciate and they make more gains as the price continues to climb. Once the price is fully pumped, the originator of the scam sells their stake to incoming buyers. Since the originators have a huge stake in the asset, their sell-off will send the price crashing down.
Important facts to note about pump and dump scam signals:
- Enriches Scammers: Pump and dump is a fraud intended to bring big gains for the scammers and heavy loss for gullible investors. The originator of the scam plans to take money from innocent investors by encouraging them to buy an asset-based on false information. The game is that when the investor’s buy-in, the pumper is selling off and pushing down the price.
- Prohibited by Law: There are laws that make this act illegal in the securities market. The securities act of 1933 states that it’s criminal “to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact.” A similar law can also be found in the securities exchange act of 1934.
- Wired Fraud: Pump and dump is considered a wired fraud because the scammers mostly communicate via electronic methods such as email, social media platforms, direct messaging, or direct phone calls to pump the asset.
- Over the Counter Trade: Assets traded on OTC platforms are susceptible to fraud since some of them do not have any reporting or registration requirements which makes them prone to scam activities.
How to Avoid Fake Crypto Trading Pump And Dump Signals.
Not to worry about the fake crypto signals or pump and dump, here are ways you can avoid them.
- Do not rely on unverified third party information
- Do your own research about a coin you intend to buy, check the project website, social media presence, and read through the whitepaper.
- Engage the services of an analyst to review the coin performance
- Avoid being taken by unrealistic promises and plans, check out for other red flags
- Sticking to well-known exchanges and established coins will keep you out of trouble
There are a few reliable crypto trading signal providers you can focus on to avoid scams.
Important Facts to Note About Crypto Trading Signal
- The crypto market is highly volatile so even the best professionals can make mistakes in providing signals
- Some signals cannot be trusted because they are unverified
- Signals are not 100 percent guaranteed because it’s impossible to predict the behavior of different coins at the same time. It’s possible that the information could be wrong.
- Even the paid signal information could be wrong, it’s important to ensure reliability before choosing a paid signal.
- It’s possible to lose money due to errors in the crypto trading signal
As much as there are fake signals masterminded by nefarious actors, there are also genuine ones that can help investors maximize trading profits. It’s solely the responsibility of a trader to verify the source of signals before signing up for the services. Investors can only be cut in the web of the pump and dump if they don’t cross-check the reason behind an upward trend in price. All the tips provided in this guide can help any investor avoid fake trading signals and stick to genuine ones.