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2011-07-18 23:10:35 (UTC)

Penny Stock Strategies

The penny stock marketplace is one that's weighed down with a history of penny stock trading swindles. Luckily for the everyday trader, the Securities and Exchange Commission is normally there to safeguard all of us from all of these dishonest companies. Publically owned businesses you can make investments in have been required to report important documents of information to the SEC to make sure that this particular info will be public and there is transparency in the markets. Without this responsibility, public companies could possibly maintain that they have significant income when they don't, and anyone invested in that deceitful company would find their stock worth nothing when it became known that the company is just a shell, earning little to no money. <br /><br />Penny stocks buy and sell on a exchange that is largely not regulated by the Securities and Exchange Commission (Known as the OTCBB and Pink Sheets). Most penny stocks are simply shell companies, that go through cycles of momentum and stock price gyrations because of the professionals who buy and sell them. One day a penny stock can be up 300%, then the following day it can be down 90%, yet virtually nothing at all has happened with regards to the company. Here are the reasons to stay away from Penny Stocks:<br /><br />Low Liquidity, High Risk<br /><br />Unlike the stocks listed in major stock exchanges such as the New York Stock Exchange, penny stocks usually have a very low daily trading volume. This means you could buy shares of a penny stock, and have no one to sell it to. Typically, penny stocks have volume comparable to several thousands of dollars being exchanged each day. You need decent liquidity in a stock so you can make a fast entry and exit, particularly in penny stocks where the stock price can tank rapidly.<br /><br />Pump and Dumpers<br /><br />If you should have gotten an phone call or perhaps seen an advertisement that says you need to promptly invest in a penny stock then you possibly have been a target of a pump and dump swindle. The idea behind this is to create unsubstantiated hype for a penny stock the pumper already owns, then as his targets buy into his hype and increase market price of the shares significantly, the pumper then sells their shares for a huge profit. Meanwhile, individuals that fell for the hype will quickly lose their money as the upward stock momentum drops and the stock price heads south. These are frequently boiler room brokers who as soon as they get rid of the stock they shut down shop and start again using a new name.<br /><br />Not able to Preliminary research<br /><br />Penny stocks differ from the stocks on major exchanges in that they have little to no following at all. You just about never find a penny stock being discussed by the financial news media. There are usually no analyst research on penny stocks. This absence of analysis is thought to be by some what is great about penny stocks because you can identify the next popular stock before wall street does.<br /><br />Have an Iron Stomach<br /><br />Penny stocks are known for their crazy swings in momentum. You could walk away from your computer for only a hour or so and come back and notice your penny stock went up 30%, then fell into the red. <a href="http://pennystockstobuyasap.com/the-pennystock-egghead-proven-pennystock-trading-system/">Penny Stocks to Buy</a>, <a href="http://pennystockstobuyasap.com/the-allure-of-penny-stock-investing/">Penny Stock Strategies</a>, <a href="http://pennystockstobuyasap.com">Penny Stock Strategies</a>