Why someone will provide money making ideas (stock tips) at free of cost? In your real life, do you get any quality products/service at free of cost? Nowadays, even you need to pay for pure drinking water! From watching movies to reading newspaper everything comes at a price. Occasionally, retail chain like Big Bazaar, Pantaloons offer free gift voucher. Why? Their motive is to bring back their existing customer.
Tune into any business channels, you will get dozens of free trading tips each day. Your broker is also eager to provide trading tips at free of cost. Moreover, dozens of websites offer bunch of new trading ideas everyday totally free of cost. None of them are doing charity. None of them have the motive of making you rich. Let's have a detailed look on their motive -
Motive #1 - Many operators provide free trading tips after offering the same to their paid clients. Thus, stock price gets manipulated which in turn helps only their paid clients. Suppose I have two websites; freetips.com and paidtips.com. One is for providing tips to paid clients and another for free clients. However clients don't know that both the websites are operated by the same person (or same group of people). So, what I am doing is, I am offering tips to my paid clients first. After their purchase, I am distributing the same to free subscribers. While, free subscribers start buying the same stock, the price starts moving in upward direction. Exactly at the same time, I am recommending “Profit Booking/Exit” call to paid clients. Thus, free subscribers get stuck at the top. So, my paid subscribers are getting good return at the cost of free clients. My motive is to collect more subscription fees from paid clients! This way one can easily manipulate the price of lesser known stocks (specially, midcap and small cap stocks)..
Motive #2 - Operators often offer free tips just to have a smooth exit at hefty profit. I am providinga real-life example. During 23rd and 24th July, 2014, I received a SMS from “LM-STKMKT” as follows, “Sure-shot buy call – Buy Naisargik (BSE code -531365) at 175. Target 350 within few weeks” The Company is in microcap category and I didn't hear the name before than that. Trading volume was much higher on both the days and stock price appreciated a lot. The pattern suggested that the operator had sent the same SMS to thousands of retail investors and many of them purchased the stock. The most surprising fact is th those days three operators sold around 1,20,000 am worth of 3 1,97,69,661 (around 2 crores). So, operators selling a particular stock and simultaneously sending thousands of retail investors to buy for “sure-shot to of double return!
In the next 10 days the stock was hitting lower circuit continuously and stock price reached to below 100. Then were no buyers for the same and as a result it got stuck in lower circuit. Just before publishing this book, the stock is traded around 84. Thousands of retail investors got stuck lost around 90% or more and expressed their anger in moneycontrol.com forum.
Check out the historical data from BSE website; check out moneycontrol.com message board discussion. You will find the proof of the entire episode and how thousands of innocent investors got trapped and lost their hard-earned money! Nobody is there to save them. With the advent of mobile phone and internet such practice is quiet common.