Ticker Tape Scams: Painting the Tape

Painting the tape is a manipulative technique that you will need to be aware of if you plan on trading stocks. Here are the basics of painting the tape and how it can affect you as an investor.

Painting the Tape

Painting the tape is a term used to describe unusual transaction activity with a particular stock. One of the most common scenarios involves institutional investors purchasing and selling a security among themselves in order to increase the trading volume of a particular stock. When the trading volume increases significantly, this often brings new investors into the arena. This will typically bump up the price of a security.

Sometimes, painting the tape can take another form as well. For example, let's say that a particular stock is trading at $2 per share. Suddenly, an order comes through for $4 per share. Traders could pick up on this and start reporting it as a 100 percent increase in the price of the stock.

Investment Considerations

As an investor, you need to be aware that this can happen in the market frequently. If you notice any unusual trading activity at the end of the trading day, try not to be lured in by it. It will usually end up hurting you in the long run.

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