penny stock investing 101 -099

Some experts say that the best way to earn money in the stock markets is to invest 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.
Penny stocks trading 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.
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 interested group spreads tempting information about penny stocks to lure the innocent people who are not so well informed about these companies and stock market, to buy these stocks. For wide publication of false and manipulative information they use spam, different publications and message boards as these can easily reach many people and does not cost much. The sum total of these manipulative practices results in pushing up the prices of these worthless penny stocks and once prices sufficiently go up, these groups off load their holdings and earn huge profit. Just after that due to lack of provocative information, prices of these penny stocks reach their bottom again and those who invested in them are left with worthless piece of paper.
The main risk is that penny stocks tend to move quickly either up or down. Profit can be small or large, even if you are considering to buy penny stocks with a reliable company, there are still other risks but either way it requires a great deal of monitoring of the stock market to be able to sell at the right time.
You stand the chance of losing your money if you wind up neglecting your investments. That is why you need to devote some time, if only half an hour, to addressing whether or not your money is working for you on a regular basis.
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.
If you cannot dedicate this time, then you will not be a successful penny stock trader, this means constant and consistent monitoring of your stocks and how they are performing, as well as checking out what is going on in the rest of the market and in relevant industries that may have an impact on your shares. This involves a considerable amount of time at the computer.

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