Researching Penny Stocks

| April 15, 2012 | 0 Comments

Trading penny stocks can be a lot like swimming in the ocean with sharks. One the one hand, you’re swimming in the ocean. But, on the other hand, there are sharks. If you make it, you could end up on a beautiful tropical island. If you don’t, you could be eaten alive.

The stock market itself can be dangerous, but knowing just which penny stocks to buy, sell or avoid is even more so. Some investors who have been burned (and some who haven’t) avoid penny stocks as simply too risky. The potential for gains is there, but so is the potential for disaster. For them, a get rich slow program is the way to go.

The high risk factor for penny stocks is largely due to the lack of concrete information about a given small-cap company. Exchange-traded stocks file reports with the United States Securities and Exchanges Commission (SEC), but the regulations for penny stocks are minimal. It’s common for information about a given penny stock to be poor quality, hard to find, published by the company itself in the form of a press release, or non-existent.

For those who do think they’ve got a winner penny stock, it’s important to be aware of possible pump and dump schemes. Pennystockresearch publishes a weekly report of popular pump and dump stocks to avoid, but can obviously not cover every possible pitfall. If possible, find out the history of the stock you’re looking to buy into. Read press releases, blogs by company members, reports from private stock investigative companies and newspaper articles about the given industry. Also, be aware of who the owners of a given penny stock company are and if they have been suspected of previous pump and dump schemes (possibly with a different company).

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Category: Penny Stocks

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