Who is buying penny stocks? - Investment - Day Trading

Penny stocks come cheap. It is the name given to any stock that costs below $5. Not everyone has the money to trade fruitfully in the stock market.More often than not, penny stock companies fail and investors lose their investemnt. Often these companies have great potential which they never realize, at times a company needs to raise so much capital, the shares become worthless. Penny stocks are high risk. Their are some success stories such as Microsoft and Wal-Mart which inspire optimism often this leads to people buying penny stocks in the hopes that the product and company "make it". The penny stock market is fueled by this make it big and rich mentatlity. Those who profit from the penny stocks they buy are usually traders.

The lack of information and disinformation is a major problem in the penny stock market. Companies can be knocked down to the penny stock ranks for doing bad business, and the public will not know. If a company is in bankrupcy it will have a Q at the end of the symbol. So you should be very wary of those companies. Often the history, filings and true intentions of a penny stock company is hard to gather. We've all seen the Enron's of the world fool major players. You can imagine how much easier it is to fool investors in the penny stock market.

If you happen to buy a company that fights its way to the top, you can enjoy the success of the company and your portfolio. The best tip anyone can give you before you buy penny stocks is to watch out for the liars and the pumps. This is a speculation market and major players are trying to influence your buying decisions. You can see internet forum pumps, e-mail pumps, telemarketer pumps, fax pumps, snail mail pumps, the list goes on. They provide false information enticing people to by penny stocks.

Trading penny stocks is a good way to learn about the stock market. If your already a seasoned veteran it gives you the chance to make some large gains., Most new traders don't like buying into failure and often don't trade pennies for long. Penny stocks can increase hundreds and thousands of percent overnight. Often the new traders forget to sell. You must beware of the "hot penny stock picks" sites do a lot of research first, expect scams and liars. Remember the best traders often get caught in penny stocks that plummet so don't feel bad. One more tip, learn charting and remember to buy low and sell high.

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