Boiler Room Operation: What They Are + How to Spot Them

WSW Presents... ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ Boiler Room Operations What They Are + How to Spot Them - What is a Boiler Room? - Are Investors Protected From Boiler Room Operation Frauds… - And who owns a Boiler Room? Most of you have heard of boiler room operations. That’s largely thanks to Jordan Belfort, aka ‘The Wolf of Wall Street.’ They’re often one of the first things that come to mind when talking about penny stocks. But these boiler rooms are not all cocaine-fueled cons. And there’s a reason that boiler rooms are still around today. In this post, I’ll teach you the basics of boiler room operations and some of the tricks they might use. Study up! This is important and can help you better understand the world of sketchy stocks. What Is a Boiler Room Operation? Just the name should tell you all you need to know. Do you know what a boiler room on a ship is? It’s where sweaty guys constantly shoveled coal into furnaces. That’s the vibe with penny stock boiler rooms. Then there’s the fact that stock-selling boiler rooms in their heyday were often in the boiler rooms. That just adds to the perverse legend of boiler rooms. You probably know what a boiler room is used for from the caricatures of it. It’s a bare-bones call center with unending phone directories of sucker ‘investors.’ These stock promoters would use high-pressure sales tactics like saying, “This is your kid’s college fund” in response to the most reasonable requests to consider the offer. Boiler room scammers love hot sectors. They love to push companies that are all promise but with no product. Like tech stocks in the 90s and pot stocks a few years ago. You know, the kind that that ‘Wolf of Weed Street’ used before he was exposed. How Do Boiler Room Schemes Work? Back in the day, most boiler room operations were run out of large, empty office spaces, filled wall to wall with phones and inexperienced salespeople. They’d cold-call numbers on a ‘sucker list,’ targeting those who’d fallen prey to previous scams. Once they hooked someone, a closer would get on the phone and pump up an often worthless, thinly-traded penny stock. It was all to inflate the stock price so investors could sell at the stock’s highs. These days, boiler rooms come in the form of promoters. You might see mailers, email blasts, Twitter pumps — all ways to cast a wide net. Unsuspecting newbie traders and uneducated investors fall for it too often. Don’t be one of those people. If it sounds too good to be true, it probably is. Recommended Links Just in: [Daymond John announces $100K investment]( That “missed opportunity” is investing in privately held startups. But today, anyone can invest in startups for as little as $100. Shark Tank’s Daymond John wants to show you how… [Click here for all the details.]( How to Spot a Boiler Room Operation I’m using the term boiler room here as a synonym for any kind of stock pump or promotion. If you’re on the lookout for scams and the blatant pumps that go with them, you might even find some opportunities. Here are some typical boiler room sales techniques... Aggressive Sales Tactics or Threats I don’t believe anything anyone says about a stock. There are tons of companies out there that are only selling stock. They’re selling hype and a story. One key sign of stock promotion is when the story isn’t even about the stock. It’s about you, and how you’re one click away from missing a once-in-a-lifetime opportunity. Don’t fall for the hype or give in to FOMO. Keep an eye on the stock. In an insane market, it could spike big and go supernova. If you’re more experienced, you could short it when it inevitably fails. Promises of High Returns With Little or No Risk You can minimize your risk in the market, but it involves discipline. I don’t ever want to see one of my students put themselves into a position where they lose big. So you have to follow the rules and stick to your go-to patterns to find consistency. No one will ever hand you a risk-free opportunity for high returns. It doesn’t exist. Pressure to Buy Quickly I love this part of a boiler room operation because it’s such an obvious example of the wrong thing to do. One thing that’s great about stocks is there can be less pressure in trading them compared to other kinds of trading. Sometimes you have more time to find plays. The financial media tends to overlook these stocks. With large-cap stocks like Amazon, top analysts and talking-head pundits dissect every second of every move. With penny stocks, there can be a gap between big announcements and media coverage. There can be informational inefficiencies there. The key is in knowing how to trade them. Unsolicited Offers No legit company needs to hit up potential investors with unsolicited offers. Stocks with value don’t need to look for buyers. The buyers come in because there’s value, like a legit product or service that generates revenue. They’re not spamming random casual investors to raise short-term capital. This is a boiler room operation by definition. Don’t learn this lesson the hard way. Never believe in these companies and definitely don’t hold and hope. It’s not a strategy. Are Boiler Rooms Still Around? Unethical boiler room operations aren’t what they used to be since the SEC cracked down hard. But there are still stock promoters around the world. Sometimes these operations are in countries without extradition treaties. Or sometimes they set up in countries where there are fewer rules against insider trading. They may set up in countries where they can bribe local authorities. Often these selling operations are connected with the companies whose stocks they sell — companies whose only real products are stock and hype. How Can You Avoid Boiler Room Schemes? Consider this your boiler room lowdown. If you want to become a self-sufficient, consistent trader, the first thing you need to do is ditch the ‘money mindset.’ That’s the greedy voice in the back of your head that just wants more money faster. You have to learn to think for yourself. Recommended Links [Watch Before April 25th]( ⏰ Frequently Asked Questions About Boiler Room Operations 1) Who Owns Boiler Room Operations? Often, this is the key to what a boiler room operation is. If you find out, let the SEC know. This is part of the lack of transparency that boiler rooms run on. Usually, there’s a fishy relationship between the boiler room operation and the stock it’s promoting. And for the last few decades, organized crime has been adopting the boiler room template. Good luck getting your money back from the Russian mafia. 2) Are Pump-and-Dump Schemes Used in Boiler Room Operations? While boiler rooms fit the definition of promotional pumps, they’re not the kind of pumps most people like to trade. Often, the OTC Markets will slap the dreaded skull and crossbones on these stocks. That’s the ‘Caveat Emptor’ designation that suspends the stock from trading. If you’re holding and hoping when this happens, you’re out of luck. 3) What Are the Most Famous Boiler Room Operations? I’ve talked about some infamous boiler-room operations before. The most well-known boiler room operations inspired the movies “Boiler Room” and “The Wolf of Wall Street.” They also caused epic losses for investors. Other boiler room operators have historically been harder to pin down, tied to fly-by-night companies. They’re just criminals, not egomaniacal jerks. They recognize that anonymity is one of the strengths of this con. The Bottom Line If you’re prepared and educated, you should never get caught by a boiler room. And it’s not because you know everything … It’s because you’ve learned to think for yourself. You have a strategy that suits you. And you know to do your research on every single trade. That’s how you may discover the stock is probably a pump. Once you know that, you can adjust your trading plan accordingly. This is why disciplined traders outlast the vast majority of traders who don’t make money in the market. It’s because we have a system. We don’t try to predict the future, we react. What you think about boiler room operations? Send us a reply. Talk to you tomorrow, Wall St. Warrior ⚔️ P.S. Hungry for more information? Check out today's recommended reads below👇 Monday's Warrior Recommended Reads [The #1 Stock Under $5]( Virginia Stock-Picking Millionaire Says It’s Not About Diversification! One single stock under $5- that trades under a secret name- could help you build your retirement. 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