People often say that the best way to earn money in the stock markets is to buy penny stocks. Broadly it is a good idea because if you buy penny stocks then you will get higher returns within two or three quarters. But if we look deep inside it then it is not absolutely true because it contains many hidden issues which can make your whole investment a troubled issue.
Many people believe that it is quite easy to predict the movement in the value of penny stock, but reality is far from it. The time taken for the movement in prices of these stocks is so short, that there is hardly any room to make any valid projection. As the cost of each of these penny stocks is quite low, people generally buy a good chunk of it and invest substantial amount. As such, huge amount of investment either decreases or increases in value with a small change in their prices.
The choice to buy penny stocks is much more uncertain than the purchase of traditional trades. The reason being is that the penny stock market is much less monitored than the guarded exchanges such as NASDAQ. If the red tape doesn't exist as with the traditional exchanges, it leaves the door wide open for illegitimate activities. Some penny stocks do trade on the major exchanges, however the ones that are the most insecure do not.
One important thing to consider when purchasing penny stocks is the "pump and dump." This is an unethical practice in which individuals employ various means to artificially inflate the price of a stock, and then quickly sell off all their shares, leaving unwitting investors stuck with the now-worthless stock.
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.
Though you may have planned to buy penny stocks of some reputed company, still other risks do remain there. The biggest thing is that the movement of penny stocks is very quick in either direction, up or down. It is possible that the profit may be high or low too but, in any case one has to constantly monitor the stock market so that one can sell the stocks at the right time.
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 may create gain or loss for those who take decision to buy. Only less opportunities are available for error regarding type of stock, so that you spent your time with 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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