What seems like a really easy way to make money? Buy penny stocks? Contrary to popular belief, that is wrong. As the name suggests, penny stock investing means dealing in stocks with a very low price tag. However, penny stock market does not necessarily provide you with a more controlled environment.
The penny stocks will move very quickly with the movement in the overall market. However the low cost of the penny stocks will prompt you to buy more shares but it must be understood that any major fall in the overall market can devastate the total value of the penny stock. The penny stocks are quite unpredictable in nature.
Buy Penny Stocks – Secure Exchanges
Trading in penny stocks is fraught with higher degree of risk than its counterpart – traditional trade, as there is none to control the trading activities of these penny stocks. Traditional trades are highly scrutinized and monitored by exchanges like NASDAQ, there is not much chance of manipulation in their prices and of illegal activities. As majority of trades in penny stocks take place outside these secure exchanges, there is high chance of fraudulent, manipulative and illegal activities. However, risk is quite lower for those penny stocks which trade in secured exchanges.
If you are serious about trading in penny stock and to make profit, you must be aware of the practice commonly called pump and dump. Pump and dump policy means that some strong group resort to manipulative practices to artificially raise the prices of these penny stocks without having any valid reason for its price increase and when prices increase sufficiently, they just off-load their holding in the market to realize their gain. Just after this the stock prices again touch its bottom and others who are holding these stocks are left with nothing but useless crap of paper.
The penny stock market is manipulative and when you buy a penny stock at low prices, you should keep a regular check o its movement because if you miss even a single day of observation, you will find that all your invested money is gone. This happens because the people who have internal knowledge of company inflate the price of the stock and when it has raised enough, they sell the stock rapidly resulting in huge losses to the ignorant traders.
You may be deciding to buy penny stocks from a reputable organization, but there may be other potential dangers to consider. Most importantly, penny stocks are prone to oscillate rapidly. You must keep a watchful eye on the market to know when to sell your stocks as profits range from great to small quickly.
Investments have to be checked regularly. Else instead of gaining we may end up in losing money. The gap in time may lead to the gap between profit and loss.
Buy Penny Stocks – The Right Decisions
There is far less room for error when dealing with these types of stocks, every decision to buy penny stocks you make can either make money for you, or lose money for you. And so you need to invest your time along with your money.
Most of the people think that if they have money they can earn money in the stock markets. However the most important thing which is required to make money is total dedication and your time. If you cannot give time to the trading then it will have bad results rather than doing any good to you. The services of a penny stock trader can help you in such conditions.
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