Day Trading

Penny Stock trading is highly lucrative. It is one way of earning profits, which could be several times over than what was perhaps invested initially during the trading duration. Sometimes its possible to earn as much as 200% to 1300% in profit from penny stocks that too in matter of weeks. According to the US Securities and Exchange Commission or SEC, penny stocks, also called nano stocks or micro stocks, are those that are priced at $5 or less. So for the same amount that you spend to buy few shares of a large cap stock belonging to a blue chip company listed on the national stock exchanges such as NYSE or NASDAQ, you can actually buy low priced penny stocks in large volumes. Hence a slight percentage increase in price during trading can raise the possibility of doubling your earning in just few days time.

Pitfalls to Avoid when Dealing in Penny Stocks Based on Unreliable Information Source

However I must warn you that not all pink sheet or otc stocks that are traded achieve the same results. It could so happen that the stocks of some of the micro companies hardly see any trade volumes at all. This indicates fall in requisite threshold demand needed to provide the necessary boost to raise the value of those small cap stocks priced minimally low. No wonder, trading in micro stocks although promising in terms of profit made, may carry plenty of risk.This is due to the extremely turbulent and highly unpredictable nature of penny stock trading. Even though we all despise any sort of turbulence and may want to avoid it at all costs, but its inevitable, lest there is stagnation in demand and supply. It is a necessary evil that provides the requisite trade momentum to a particular penny stock such as those listed on the OTCBB (Over The Counter Bulletin Board). It is important that you keep away from those stocks that do not see any demand in terms of trade volume at all, which renders them to remain dull, sluggish and stagnant, not fit for short term investment.

In case you have invested in a stock that hardly saw any trading since you brought them in large numbers, it is quite possible that you may have perhaps fallen victim to a pump and dump scheme, where the potential of a particular penny stock was hyped to jack up its demand and hence its prices artificially. Thereafter the shares are quickly dumped by the miscreants as soon as the prices reaches a predestined value. That is how the shrewd traders make huge profit at the cost of thousands of innocent losers like you, each day.

This happens only when you act on impulse and buy stocks without having investigated deeply into the merits of such an investment. Perhaps on impulse, you decided to buy stocks of a particular penny stock company in large volume, because of a spam alert that you received on your email inbox or as sms on your cellphone from an unknown source that you never subscribed to. Much to your dismay after you had wrongly invested, you are aghast to see the price of that stock suddenly plummet in matter of minutes, to such depths that there is no more hope for it to ever crawl back to recovery. Thereafter it no longer attracts any buyer at all whatsoever and ultimately you are left clutching on some useless papers. These are some of the greatest pitfalls of trading in penny stocks, without carrying out your own research, even if they are priced temptingly at few cents each, especially those that appear on pink sheets.

Reliable Information to Pick on Free Penny Stocks

So it is my request that you subscribe to authentic information, in the form of newsletters from few reliable source that truly enjoys a good repute amongst a large investor base. Even if some so called experts advise you to buy a particular stock, simply do not jump the gun immediately. Remain calm and do your own research to see if what has been recommended is truly genuine or not.

As caveat remember that there are far too many scam artists lurking somewhere, who are waiting to pick on novices who simply do not have any idea about trading in stocks at all. So beware of falling prey to any of the many pump and dump schemes that keep cropping up time and again. Although most reliable information come at a price, however there are certain newsletters that actually offer you with free subscription, for a limited period on a trial basis, to judge for yourself, before taking up their paid full time membership for subscription.

Author: Somik Ranjan Roy
Article Source: EzineArticles.com
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