Fact Or Fiction: 9 Pennystock Myths Exposed

| June 2, 2015

fact or fictionPennystock Myths – BUSTED!

There are millions of searches for “Pennystock” everyday on Google.  Some results are stories about average people who find success trading penny stocks.  Other results are heated and passionate rants about why penny stocks don’t work.

Unfortunately both groups of results are full of bad myths and misconceptions.  Today I want to take a look at some of the most common pennystock myths and set the record straight.

So, let’s jump right in…

Myth 1: “A Pennystock’s Low Price Means There Is Low Potential.”

Critics of pennystock traders like to suggest pennystocks trade at such low prices, they offer very little upside. Nothing could be further from the truth.

The low price nature of some select pennystocks means they are often open to high growth. While a typical Wall Street stock may see gains of 6%, 7%, or 8% over the course of a year or more… Some pennystocks can experience double-digit gains in a matter of days.

Just look at Oncothyreon $ONTY.

pennystock chart $ONTY

The company name might be impossible to say… but the stock results will leave you speechless.

This tiny biotech pennystock announced positive data for a breast cancer drug.

The stock jumped on the news from a $1.49 price to a high of $4.69… that’s a gain of over 214% in less than 12 days!

Clearly pennystocks have the potential for explosive gains.

Myth 2: “Pennystock Companies Aren’t Real Businesses.”

If you want to debunk this common pennystock myth, just look at Pier 1 Imports $PIR, Monster Beverage $MNST, and American Axle $AXL.

At one point, each and every one of these businesses was a pennystock.

Companies find themselves trading for pennies a share for any number of reasons… the overall market, a bad quarter, a broken customer contract.  Just because a stock trades for pennies doesn’t make it a bad company…

You just need to find a way to separate the good from the BAD!

Myth 3: “Every Pennystock Is A Pump And Dump Scheme.”

Look, let’s be honest here… Pennystocks are definitely a target of pump and dump scammers.  There are thousands and thousands of pennystocks… but only a handful of pump & dump scams in the market.

The key here is being able to spot these schemes and side step them.

Want a leg up on the competition?  Start by reviewing our Pump & Dumps Exposed research paper… which you can download for free on our site.

Study it… and share it with your friends… and you can avoid this Myth forever!

Myth 4: “Pennystocks Are Exponentially Riskier Than Blue-Chip Stocks.”

Ahhh, risk… the age old issue…

The truth is, there’s risk in any investment.  Remember Enron?  Many thought that was a blue chip… what about GM?  Remember, they went bankrupt… or Lehman Brothers.  Another white shoe firm gone.

Granted penny stocks are risky… but there’s still a chance to lose money with blue-chip stocks selling above $100!

To avoid being a victim of risk, make sure you educate yourself on the best ways to trade penny stocks, how to avoid Pump & Dump Scams (You did download that free report right?), and make a habit of monitoring your investments.

Myth 5: “Pennystock Trading Is A Guessing Game.”

This is a favorite myth of the ignorant.

When it comes to trading pennystocks, success and failure is only found through hard work, research, and using your brains.

It’s far from a casino or a flip of the coin.

There is as much skill (maybe more) involved in trading a pennystock as there is in investing in large-cap stocks.

You’ve got to have the skill of conducting solid research and separating the fluff from the truth.  There’s no guessing.  Pennystocks are not lottery tickets.

Only to the uneducated are pennystocks a guessing game.

Myth 6: “Shorting Is The Only Way To Make Money With Pennystocks.”

Personally this is a Myth I think was started by successful pennystock traders to scare away noobs.  You know… new traders.   Trading is hard enough… tossing on the idea of going short adds a level of complexity most traders don’t want to think about.

And that’s great news for the experienced pennystock trader.

There are many pennystocks set to plummet, plenty have bright futures too.  You can make money going long penny stocks… just as you can make money shorting them.  Either way takes education, knowledge, skill, and experience.

Myth 7: “Experienced Wall Street Investors Can’t Apply The Same Tactics.”

Once again, a rumor to keep out competition…

Trading pennystocks is a different game than investing in blue chip stocks.  Unlike Warren Buffett, who buys and holds forever, the pennystock investor must monitor their trades day in and out.

That said, many strategies, like buying value, watching for momentum, and other big stock strategies, will work well with pennystocks too.

The strategy is the same… just different stocks and stock prices.

Myth 8: “The Experts Have All The Answers.”

I hate this Myth…

Nope, the experts don’t have all the answers… never have and never will.  I’ve been trading for over 20 years now and I still learn new things every day.

That said, experts can teach you a thing or two.  I’m convinced if I could go back in time and look over JP Morgan’s shoulder for a few days… I’d learn more than in the last five years of trading.

Never underestimate the power of a mentor, a teacher, or a friend.

Man is only a failure when he fails to ask for help in his time of need!

No expert has all the answers… but they do have some answers… and you’d be wise to pay attention!

Myth 9: “Trading Pennystocks Is Easy.”

This one is true… trading a pennystock is so easy, anyone can do it.

If you believe that…

All I gotta say is – are you CRAZY?

Trading a pennystock… any pennystock isn’t easy.  You’ve got to work at it, do your research, and study like there’s no tomorrow.

Anyone who thinks pennystock traders roll out of bed, work in their pajamas, and finish the work day 20 minutes later are just plain wrong.

True professionals spend hours and hours every day studying the markets looking for indicators and researching stocks.  The time and dedication can-not be underestimated.

So there you go.  Nine great stock myths debunked!

If you have a myth that you’d like to know about… or want my take on, shoot me an email or leave me a comment on the website.  I look forward to hearing from you.

Good investing….

Brian Kent

Note:  If you’re interested in learning more about Brian Kent’s Penny Stock All Stars premium service… and learning about the stocks were trading for profit… you can get the inside scoop on penny stocks here.

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About the Author ()

Brian Kent is the Editor for PennyStockResearch.com. He also pens Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market's next Blue Chips.