Feed: Penny Stock Trading: The Real Story - AggScore: 11.2

Penny Stock Trading: The Real Story

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pI am a notoriously opinionated person and so far I have intentionally avoided from unpopular topics and written some fairly plain how to articles on investing discussions .nbsp But I just suffered through an article that made my head spin the article concerned Penny Stocks.ppnbspppAs a 25 year veteran of day investing on both Wall Street and the Chicago Mercantile Exchange there are very few areas of investing that are plagued with more vice, scammers and rightdown corruption than the penny stock market .ppnbspppI realize , that is a very infuriating statement to voice ....but I will back up my statement with reality and experience, and not all Penny Stocks are compromised ...but the overwhelming majority of Penny Stocks are simply fronts for companies that mayor may not exist .ppnbspppHere is how the cycle of a Penny Stock developes .nbsp As you might have taken notice , an army penny stocks are popularized through newssheets and advertising.nbsp There is a very good reason for this, as the penny stock companies can often prognosticate the the pump and dump industry a a portion of stock in lieu for influencing the stock price to rise .nbsp The newsletter typically touts the potential for the stock to rise based upon certain shaky factors occurring and usually exagerates on the lessthanbelievable potential the stock has should these certain factors occur.ppnbspppI oftent recommend that unsuspecting investors in penny stocks call the c corporation itself and inquire about capitalization and revenues.nbsp Without exclusion, these stocks usually are pathetically undercapitalized and have no revenue flow to speak of .nbsp Often , an investor questioning the company will be passed on to an answering machine or the newsletter promoting the penny stock.nbsp The SEC has calculated that the majority of penny stocks fall into the pump and dump category. And with good reason.ppnbspppA normal stock, traded on an exchange, usually has a firm assigned as a market maker in that stock , along with a floor specialist who is responsible for the trading of that stock.nbsp This system allows transparency in the trading of any stock and gives an i trader to see the exact and falsifiable volume and price movement of the security.ppnbspppThis orderly system is nonexistant in the Penny Stock market, and the penny stock issues are typically absent a recognizable market maker.nbsp Frequently , the market maker in a penny stock organisation is the actual company itself.nbsp The fox is in the henhouse, so to speak.nbsp What this means is that the Penny Stock company is setting both the bid and ask prices on its own stock.nbsp As is often case , most Penny stocks are traded on the Pink Sheets which puts it into the category of trading in the wild west.ppnbsppp Well schooled legitimate have estimated that 9 out 10 Penny Stocks collapse within the first year of their offering.nbsp I have read about n percentages as low as 7 out of 10 talkednbsp about, but the point is simple .nbsp When you are day trading Penny Stocks you are working in a nontransparent, nonexchanged orientated market, and this is the prereqeuisite conditions for disaster.nbsp It is usually just a matter of time.ppnbspppFor the record, I am not saying that every single one innbsp penny stocks are unscrupulous or treacherous , just the majority of them, and odds do not favor permanent success.nbsp Heed my warning and prosper , there are simply too many exchange traded stocks that will earn you plenty money than risking a single cent of your hard earned money in the Penny Stock Market.ppnbspp