Penny Stocks- A Secret To Make Money

By Author: Deon Lee
Total Articles: 5
Comment this article

The term penny stock frequently suggest any stock trading outside one of the major exchanges (NYSE, NASDAQ, or AMEX), and is often considered derogatory. Penny stocks let an investor the capability to pay for a large number of shares with a reasonably small quantity of money. It produces a huge return on their early investment. If a speculator has a strategy for trading penny stocks, it can be successful. On the other hand, the likelihood of get success at this game is uncertain.

A lot of Internet users become prone to e-mail spam promoting penny stocks. According to a survey, 15% of all spam was related to penny stock fraud. According to the study, "People who responded to the 'pump and dump' scam lost 8% of their investment in two days. On the other hand, the spammers who buy low-priced stock before sending the e-mails, normally see a return of between 4.9% and 6% when they sell."

Brokers usually get salaried "under the table" secret payoffs to raise for sale such stocks. The subject stocks usually have small or no liquidity ...
... earlier to the block purchase. After the block is bought, the firm's participating brokers will sell the stock to their brokerage customers at the then-current quoted ask price, to the often victimized investors who are generally unaware of this practice.

How to Boom in Penny stocks

To have Information of the company's genuineness and other things is essential for any investor. Penny stocks are well-known for their high risk, high reward, but then it necessitates good effort on the part of the investor to know and understand which penny stocks would be worth the risk. Since a penny stock is priced very low, its standing in the market usually is not determined by market capitalization or the manner in which it is listed.

In the United States, penny stocks are traded Over the Counter (OTC) and the standard institution on security exchange, the SEC (Security Exchange Commission), issues ample warnings about the risk involved in trading with penny stocks. Since these are small shares of small companies, their information can be very challenging to obtain and they can be easily manipulated. In the United Kingdom, penny stocks or penny shares are secluded by a mandatory risk warning. In countries like India, penny stocks are known as small cap stocks and though the OTC mode of trading is not really in vogue, these stocks usually find a substantial number of investors. This is for the reason that the reward is very high. The investors who have proper knowledge and logical speculation usually ride high with such penny stocks all over the world.

With larger companies, the stakes are high and approximately every investor is concerned about the company's growth and expansion plans. Curiosity fuels the quest for information. On the other hand, in the case of a penny stock, information is the major challenge for any investor. Besides, these small companies do not file reports or press releases with the standard commissions thus making it difficult for the regulatory bodies to trace any detailed information about them. This yields the likelihood of fraud. Given their irresistibility in terms of high-end profits, the regulatory bodies have toughened their rules and position against small companies, and they are encouraging them to file details and information. Needless to say, a vigilant regulatory system, along with an investor's foresight, can yield high profits out of penny stocks.