Every since I start my wholesale directory I've been #1 or #2 in Google for the term "legitimate wholesale". I just exchanged links the other days with a related website and my placement immediately dropped to about #8. Same with the term "real wholesale". Is that because of the link exchange? The website I exchanged links with is www.WholesaleGemShop.com. I think they exchange links with just about anyone so that might be considered a link farm.
You are ranking well for "Legitimate wholesale" because of keywords in domain. This term brings in 660,000 competing pages which is very little in the sense of SEO. You do not have to optimize for this term because it does not have any or much search volumes, maning to say almost no one search for this term as reflected on Overture and Wordtracker. Your website is registered on Nov 2007 and is relatively young with only 21 inbound links in Google cache and out of it 16 links is from forums. This is really bad. Your website is most likely to experience Sandbox effect real soon and it has nothing to do with WholesaleGemShop.com I hope that answers to your questions.
I just had my website submitted to 500 directories and several article directories. I'm also active in some forums. What else can I do to increase my inbound link count?
It is not the amount of links you have. Ok in short, read this article http://www.ezbusinessneeds.com/view-web-book.php?record=65&cat=sem
It just seems to be searching Zimbio.com for articles. Do I leave my url in their comments area. Isn't that spamming?
I've also heard about commenting on wordpress blogs that have an area on their comment form for your URL. The software I was using is called PR Backlinks Generator. Isn't commenting on Wordpress blogs that are hosted by Wordpress the same as commenting on the main Wordpress.org site over and over again? I thought having a backlink from (let's say) 100 DIFFERENT websites is better than having 100 backlinks from the SAME website. Or am I wrong?