We should all tread with great caution when before we start trading penny stocks. There is lots of scamming in this market as it attracts people who want to make money quickly.
Buying penny stocks can show a nice profit however, as long as you are aware of the risks involved. You need to learn a few things about them first because there is often a reason that penny stocks are so relatively inexpensive to buy.
Here are some reasons:-
- They might have very little asset value or be a new market stock
- Little market capitalization and liquidity are also common
- The company itself or the directors backing it are normally difficult to carry out any investigation on.
- Trading stock in small sums is often a sign of a lack of a past record of trading.
- Personal bankruptcy of the people involved at some time is another possibility.
- Unfortunately there are people out there who set them up just for a scamming exercise.
You just have to accept that standard stock market trading is a lot safer. When investors buy penny stocks, they know that profits are less likely than losses. In fact it is so risky that you need to accept that all your money could disappear.
Some good companies are in this market for their own very good reasons however. They will disclose all the details of the company and the people behind it. Traders that take it seriously keep an eye out for this type.
The company’s honesty should not come from some random person though. If an email comes from someone you do not know do not believe it. Be aware of these alerts. Someone is usually making money from setting them up.
Fortune 500 companies do not often start life by trading in the penny stock market.
Back to the email scam. Shares will be first bought by the person carrying out the scam. They then inform the world that it is a good thing to invest in by pumping out countless emails.
The value of the stocks will then go up because there are always a few people will not know what is happening and invest some money. A penny share does not need an awful lot to make it increase considerably. These poor gullible people will then be left penniless as the scammer is selling his shares for a hefty profit.
Luckily there are some good stock trading courses around that will provide further details for you. Then you will actually be able to make some profits while day trading penny stocks
