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Penny Stocks Can Be Lucrative
Most people consider penny stocks to be a poor investment. I, on the other hand, think that investing in a penny stock before that company becomes profitable company is the best way to invest, because you can make a lot more money with penny stocks than would ever be possible with blue-chip stocks. I will now outline for you what you need to know about penny stocks and how to find the best one in which to invest.
Penny stocks are defined differently depending on who you talk to. Stockbrokers define them as any stock that trades below $5 per share. Regulatory agencies sometimes classify them as a stock with a price below $2. But, generally speaking, a penny stock is any low-priced security that trades on one of two exchanges; the Pink Sheets or the OTC Bulletin Board.
The Pink Sheets are an exchange where most startup companies first get listed. There are no listing requirements to be traded on this exchange. A company does not have to have any sales, nor does it have to reveal how many shares outstanding it has to qualify for the Pink Sheets.
The reason why a company tries to get listed on the Pink Sheets, even though their stock will not go up in price because they have no sales to speak of, is because it gives their company more substance and credibility; it is typically easier to attract additional capital, obtain financing, and execute contracts and agreements if a company is publicly traded, even if it is on the Pink Sheets.
Also, it is easier to get transferred from the Pink Sheets to one of the larger exchanges than it is to go from being a private company to hopping directly on to one of the major exchanges, such as the NASDAQ or NYSE. Companies listed on the Pink Sheets trade as ridiculously low as $0.00001 per share, all the way up to $500 per share and sometimes beyond. Foreign companies often have some of their shares sold in the United States by listing them on the Pink Sheets.
The OTC (Over-The-Counter) Bulletin Board is similar to the Pink Sheets. This exchange consists of relatively young companies either with no sales or a small amount of sales. Companies listed on it are sometimes fully reporting (meaning that they reveal how many shares they have outstanding and what their balance sheet looks like). Often, companies go from the Pink Sheets to the Bulletin Board once they are ready to become fully or semi-reporting.
Most publicly traded companies that are now listed on one of the major exchanges (NASADAQ, AMEX, NYSE), at one time or another, were penny stocks listed on the Pink Sheets or Bulletin Board. Rarely does a company go from being private directly to one of the 3 major exchanges. Google is a rare example of a company that was able to do that, because they were so successful so quickly. But, most companies have to pay their dues and edge their way up from the penny stock exchanges to the bigger ones.
So, investing in penny stocks can be an excellent investment because some of these young companies will one day be worth a fortune. The hard part is finding the right company to invest in, because for every successful startup company, there is also one that fails within the first year or two.
To find the right company, there are a few things you need to look for. Number one, you need to do some research and try to find out how many shares the company has in its float. The float is the number of shares that are currently being traded. Companies listed on the Pink Sheets usually do not officially report this number to the public, but with a little research, you can usually find out. It is usually contained in articles written about the company, or in TV or radio interviews with company officials that are sometimes archived on certain websites.
You can also look for the information on message boards or forums where stock traders chat with each other. Simply do a search on Google and read every article ever written about the company, and you will likely find out about their float. This is important because you do not want to invest in a company that already has something like 500 million shares in its float. Companies with this kind of share count are likely having problems moving forward, so they have issued more and more shares to raise money just to stay alive. You want to look for companies that have approximately 5 to 100 million shares in their float.
Other things that you should look for in a new company are barriers to entry, patents, and consumer demand. Here are the questions you need to ask yourself when analyzing the probability that a company will be successful:
1) Barriers to Entry: Are there are obstacles that will make it difficult for the company to sell its products or services?
2) Patents: Is the product that the company is going to sell patented? A patent will prevent other companies from producing the exact same product.
3) Consumer Demand: Will there be a demand for what the company is selling? Sometimes a company has a great new invention or an exciting technology, but if it is not something practical that consumers are going to want or need, then it does not matter how great it is.
Try to set aside some money for investing in penny stocks and start while you are still young. The earlier you get started, the more money you can make in the long run. Just make sure you do your homework before you invest and you should do extremely well.
Jim Pretin
http://www.articlesbase.com/non-fiction-articles/penny-stocks-can-be-lucrative-120646.html
Pump and Dump Investing Scams
It is such a shame that stuff like this still goes on in the world, but unfortunately it is a fact of life if you plan on investing in the stock market. When you start investing you may begin by searching online for some good articles or resources. Also, you may sign up for some newsletters or submit your email address to websites for information. Soon after you do that you will discover that all these nice people start sending you such wonderful stock picks.
Well do not become one of the many people who fall for the old pump-and-dump scam everyday. Many new investors eyes become wide open with greed when they see that they could potentially make a lot of money quickly if they buy a ton of shares of a cheap penny stock. Unfortunately, there are pump-and-dump scammers out there hoping just for that emotion of greed to overtake common sense.
A pump-and-dump scam simply means someone is trying to pump up the price of a stock, usually a cheap penny stock, and then as the price goes up the pump-and-dump scammer sells all of their shares. This leaves the investors who were scammed with virtually worthless shares by the time they realize what happened.
So as a new investor, never let your greed overtake your common sense. Most penny stocks are penny stocks for a reason because they are worthless. Never buy a stock you receive through and email, regular mail, or through a phone call. There is no substitute for doing your own research when it comes to investing in stocks.
The stock market should never be thought of as a get rich quick scheme. I think too many people do not understand just how quickly they can lose money if they let their emotional greed control their actions. Remember the stock market should be treated as an investment tool not a casino.
Chad Surges
http://www.articlesbase.com/investing-articles/pump-and-dump-investing-scams-131387.html
Investment Spam is Dangerous
Since the year 2004, there has been a sharp increase in the amount of investment spam we are receiving in our inbox. I personally receive up to 10 emails per day containing offers or lures to invest in various scams. It is estimated that millions of dollars are lost every year by people who have invested money in something they read about in an email. For the purposes of this discussion, we will outline each of the bogus investment opportunities that are circulating the internet so that if you encounter one of them, you will not be tricked into investing.
Pyramid schemes are probably the most popular. Typically, you will be asked to invest a certain amount of money, and then you are promised a return when new investors make an equal contribution. Eventually, the pyramid either collapses or the person who initiated the pyramid is able to make a lot of money, but no one else makes anything.
A common scam associated with the stock market is referred to as the pump and dump. This is when a small group of investors who hold a large number of shares in a penny stock hype the stock to the general public. The resulting frenzy drives up the price of the stock, at which point the pumpers dump their shares at a high price before the rest of the investors realize that the company is worthless.
Sometimes, pump and dumpers will engage in short selling (short selling is perfectly legal; you borrow stock from someone else and immediately sell it, hoping that the price of the stock will go down in the near future so that you can buy it back at a lower price and return it to the lender at a profit). With pump and dump short selling, the borrower instantly sells the stock that was loaned to him and then goes around spreading bad rumors about the company to drive the stock price down so he or she can buy it back at a low price before returning it to the lender.
You should ignore any emails you receive that promote offshore investing or prime banks. Promises of huge returns from offshore investments are usually totally disingenuous. Prime banks are the top 50 banks in the world. Solicitors for prime banks will ask for your money so that they can invest it in high yield prime bank financial instruments. However, they will likely invest your money in high risk, speculative investment vehicles that have absolutely no connection to prime banks whatsoever.
I hope the information presented here has put you on notice. But, you should not necessarily ignore all of the investment spam in your inbox. You might receive an email containing a stock tip that could turn out to be very remunerative. Just make sure you research the company on your own before you buy the stock so that you can make an informed decision.
Jim Pretin
http://www.articlesbase.com/spam-articles/investment-spam-is-dangerous-101466.html
Explaining Penny Stocks
Penny Stocks are amongst the most uncertain and unpredictable investments you can easily make in today’s financial markets. With appropriate decision management techniques, nevertheless, you can easily gain the benefits of the enormous percentage swings these explosive stocks have to offer, without putting your entire investment account at risk.
Of course, inexperienced Penny Stocks traders obtain burnt every single day investing in stocks, but where does all that cash go then? Well, the answer can be quite simple as in Smart money, Hedge Funds, market Making Firms, and believe it or not, even consumers just like you!
Penny Stocks mostly have market caps under $500M and are considered extremely speculative, particularly those that trade on low volumes over the counter. The Securities and Exchange Commission warns that, Penny Stocks may trade infrequently, which means that it may be difficult to sell penny stocks shares once you own them.
Because it may be difficult to find quotations for certain stocks, they may be impossible to accurately price. Investors in the field of Penny Stocks should be prepared for the possibility that they may lose their whole investment.
Many Wall Street firms simply do not feel that it is very necessary to dispel the myths floating around about stocks. Instead, they would rather exploit these misconceptions for their own benefit. For this reason, the information super highway that allows many individual investors to make their own knowledgeable and unprejudiced decisions remain strictly compromised when it comes to Penny Stocks.
Thousands of Penny Stocks see more active trading each day than 1000’s of stocks listed in the local newspaper, but for some reason they never make it to the presses.
Mercifully, there is now an actively pursuing positive change for low priced equity traders by the diffusion of timely Micro Cap Stock market Analysis, Unbiased Coverage for individual stocks, and immediate access to the same information that has been available to Blue Chip market timers for years.
Well! In addition to offering the webs most sought after online information sheet for Real Micro Cap Stocks, Penny Stocks Daily also offers the free daily analysis of the Over the Counter Bulletin Board and Pink Sheets Markets, Penny Stocks under $1.00 listed on the glorious NASDAQ, AMEX and more.
By subsequent followings of these broad liquidity and price statistics on a day-to-day basis, one can gain a better feel of the overall markets, and therefore make better trading decisions.
Now, you have the new Dow Jones Industrial Average to detect market strength and weakness in Blue Chip Stocks, also you can easily know if you or someone you know are being a contraire or a trend follower in the under followed markets for stocks.
Well with studies you simply will not find out anything elsewhere. Also, be sure to review out the wide array of informative and tutorial articles on everything from Micro Cap Basics and Risk Management to strategies and ideas that you may not have thought of.
Eventually, for Penny Stocks be sure to review the extensive Frequently Asked Questions areas no matter where and it is most important to understand if you are in your investing decision-makings.
How to understand how liquid Penny Stocks are?
In the world of stocks, to know how many shares there may be beneficial is necessary and always keeping that in mind is critical. Here, do not screen for stocks that are potentially being sold short, but know that short sellers are certain buyers at some point or the other, and are a natural part of any monetary instrument.
Here to watch out for, are a huge percentage of the company shares being sold short, which would potentially raise the notion of unprotected short selling. This is when dishonest investors can sell shares on the splendid open market that cannot even exist aspect element within the Penny Stocks market.
This is noticeably not good for everyone those who are involved in stocks, and the SEC and congress are beginning to take steps towards combating this activity.
Nobody can guarantee the accuracy of the number of shares outstanding that are posted, and in many of the cases, companies can also issue shares in a way that is quite intangible, and there is an admittance that there will often be more issued, especially when the stock price goes up in dealing with Penny Stocks.
Never forget that the company is not selling these shares directly to the public, but is rather, issuing them to different corporations and persons for representing some sort of service or purchase, and they in turn can sell them to the open market dealing in Penny Stocks.
William Smith
http://www.articlesbase.com/non-fiction-articles/explaining-penny-stocks-80296.html
Why You Should Invest In Penny Stocks
Most people consider penny stocks to be a poor investment. I, on the other hand, think that investing in a penny stock before that company becomes profitable company is the best way to invest, because you can make a lot more money with penny stocks than would ever be possible with blue-chip stocks. I will now outline for you what you need to know about penny stocks and how to find the best one in which to invest.
Penny stocks are defined differently depending on who you talk to. Stockbrokers define them as any stock that trades below $5 per share. Regulatory agencies sometimes classify them as a stock with a price below $2. But, generally speaking, a penny stock is any low-priced security that trades on one of two exchanges; the Pink Sheets or the OTC Bulletin Board.
The Pink Sheets are an exchange where most startup companies first get listed. There are no listing requirements to be traded on this exchange. A company does not have to have any sales, nor does it have to reveal how many shares outstanding it has to qualify for the Pink Sheets.
The reason why a company tries to get listed on the Pink Sheets, even though their stock will not go up in price because they have no sales to speak of, is because it gives their company more substance and credibility; it is typically easier to attract additional capital, obtain financing, and execute contracts and agreements if a company is publicly traded, even if it is on the Pink Sheets.
Also, it is easier to get transferred from the Pink Sheets to one of the larger exchanges than it is to go from being a private company to hopping directly on to one of the major exchanges, such as the NASDAQ or NYSE. Companies listed on the Pink Sheets trade as ridiculously low as $0.00001 per share, all the way up to $500 per share and sometimes beyond. Foreign companies often have some of their shares sold in the United States by listing them on the Pink Sheets.
The OTC (Over-The-Counter) Bulletin Board is similar to the Pink Sheets. This exchange consists of relatively young companies either with no sales or a small amount of sales. Companies listed on it are sometimes fully reporting (meaning that they reveal how many shares they have outstanding and what their balance sheet looks like). Often, companies go from the Pink Sheets to the Bulletin Board once they are ready to become fully or semi-reporting.
Most publicly traded companies that are now listed on one of the major exchanges (NASADAQ, AMEX, NYSE), at one time or another, were penny stocks listed on the Pink Sheets or Bulletin Board. Rarely does a company go from being private directly to one of the 3 major exchanges. Google is a rare example of a company that was able to do that, because they were so successful so quickly. But, most companies have to pay their dues and edge their way up from the penny stock exchanges to the bigger ones.
So, investing in penny stocks can be an excellent investment because some of these young companies will one day be worth a fortune. The hard part is finding the right company to invest in, because for every successful startup company, there is also one that fails within the first year or two.
To find the right company, there are a few things you need to look for. Number one, you need to do some research and try to find out how many shares the company has in its float. The float is the number of shares that are currently being traded. Companies listed on the Pink Sheets usually do not officially report this number to the public, but with a little research, you can usually find out. It is usually contained in articles written about the company, or in TV or radio interviews with company officials that are sometimes archived on certain websites.
You can also look for the information on message boards or forums where stock traders chat with each other. Simply do a search on Google and read every article ever written about the company, and you will likely find out about their float. This is important because you do not want to invest in a company that already has something like 500 million shares in its float. Companies with this kind of share count are likely having problems moving forward, so they have issued more and more shares to raise money just to stay alive. You want to look for companies that have approximately 5 to 100 million shares in their float.
Other things that you should look for in a new company are barriers to entry, patents, and consumer demand. Here are the questions you need to ask yourself when analyzing the probability that a company will be successful:
1) Barriers to Entry: Are there are obstacles that will make it difficult for the company to sell its products or services?
2) Patents: Is the product that the company is going to sell patented? A patent will prevent other companies from producing the exact same product.
3) Consumer Demand: Will there be a demand for what the company is selling? Sometimes a company has a great new invention or an exciting technology, but if it is not something practical that consumers are going to want or need, then it does not matter how great it is.
Try to set aside some money for investing in penny stocks and start while you are still young. The earlier you get started, the more money you can make in the long run. Just make sure you do your homework before you invest and you should do extremely well.
Jim Pretin
http://www.articlesbase.com/non-fiction-articles/why-you-should-invest-in-penny-stocks-111316.html
Taking Penny Stock Risks
The term penny stocks generally refers to any stocks that trade outside the major stock exchanges and is taken as ‘deprecatory’. The major stock exchanges would include: NASDAQ, AMEX, or NYSE. The term Penny stock is also often used interchangeably with small caps and nano caps. The title of penny stock however should be determined by the share price rather than the listing service or market capitalization.
Penny stocks often have market caps lower than $500 million. This makes it highly speculative for those who trade low volumes ‘over the counter’. Some believe that penny stocks are difficult to sell once purchased because of the difficulty in locating quotes on particular penny stocks. Investors in these stocks are expected to understand that the loss of their entire investment is a viable risk.
Despite the risks involved, penny stocks are attractive to new investors because of the low initial price and the possibility of quick payouts of up to 100 percent in some circumstances. Just as there is the potential of high profits, that potential comes with the risk of substantial losses. penny stocks are considered high-risk investments. As a result investors should be aware that these stocks have a limited amount of liquidity and fraud in addition to a lack of financial reporting.
Penny stocks have fewer shareholders. This makes them less liquid than stocks of larger companies. It also means that it will buy and sell less shares. The fact that less shares are traded generally results in unpredictable stock prices. This can either make the prices rise sharply or suddenly decline. The lack of liquidity within this market leaves it wide open to exploitations by market makers, management, and other parties. These stocks can also be difficult to sell quickly as some days there simply are no buyers.
Another reason for this lack of liquidity is the minimal listing requirements for smaller market listings as compared to NASDAQ or NYSE. Companies that have fallen below requirements for the larger exchanges have the opportunity to get listed on the OTCBB or Pink Sheets.
If you are comparing Pink Sheets to the major exchanges you might want to take note of the fact that Pink Sheets have very few regulatory requirements for those being listed. In other words, there is little protection in place for shareholders by way of accounting standards, notifications of ownerships of shares, etc.
These things combined make penny stocks very attractive tools for fraud. This does not at all mean that all stocks listed on the OTCBB are untrustworthy, it simply means that you should keep your eyes open when making deals on this market.
Christopher Smith
http://www.articlesbase.com/non-fiction-articles/taking-penny-stock-risks-89054.html
What Is A Penny Stock?
A Penny Stock is a share that trades from a penny to $5. Penny Stock has a large reward prospective with some having gone from a penny to $20 and even more too.
Actually, these stocks commonly refers to any stock trading outside one of the leading major exchanges like the NYSE, NASDAQ, or AMEX, and is often considered to be critical.
In other words, the definition of a Penny Stock is a low-priced, speculative security of a very small company, no matter what of market capitalization or whether it trades on a securitized exchange like the NYSE or NASDAQ or an “over the counter” listing service.
A good example of the OTCBB or Pink Sheets too. The terms Penny Stock, microcap stocks, small caps, and nano caps are also all indeed new and are used interchangeably, however the stock status is determined by share price, not market capitalization or the listing service.
A Penny Stock basically has market caps under $500M and are considered extremely speculative, predominantly those that trade on low volumes over the counter. The Securities and Exchange commission warns that these stocks can trade on the odd occasion, which means that it can be difficult to sell Penny Stock shares once you own them.
Because it can be difficult to realize quotations for a sure Penny Stock, since they can be impossible to be accurately priced. Investors would be equipped for the probability that they can lose their whole investment.
Explaining The Penny Stock More Briefly
Many innovative investors lure to the appeal of these stocks due to the low price and potential for rapid gains which in some cases may be as high as several hundred percent in a few days time span. In the same way, severe drops also occur and many penny stocks can drop over 99% trait within the long term.
Therefore, the SEC warns that these stocks are a high-risk investment and investors could be aware of the risks involved. These risks include limited liquidity, lack of financial reporting, and maybe deception too.
Well! In terms of liquidity, since a Penny Stock has fewer shareholders, it is less fluid, meaning that it will not trade as many shares per day as a larger company. Any impulsive change in demand or supply of these stocks can lead to a whole heap of volatility within the stock price.
This lack of liquidity can send a stock price soaring up promptly or also come down rolling. Lack of liquidity and volatility also makes Penny Stock much more vulnerable to manipulation by the concerned management, market makers, or third parties.
A lack of liquidity can also make it extremely difficult to sell a stock, particularly if there is no people that day to trade in to these stocks.
In other words, unlike NASDAQ or the NYSE, there are only minimal listing requirements for a Penny Stock to remain on the splendid OCTBB, namely that they make their filings with the SEC on time.
In fact, companies that fails to meet minimum standards on one of the primary broader exchanges and are depicted and are often realist on the splendid OTCBB or the Pink Sheets.
In addition, Penny Stock trading on the excellent Pink Sheets has little to no regulatory or listing necessities. At least as compared to the major markets. There are no minimum accounting standards, change in notification of ownership of shares, and reported other material changes affecting the financial practicability of a company, all of which are designed to protect the shareholders interests.
These stocks therefore can be new in a number of counterfeit schemes, from pump and dump, short-and-distort, and selling chop stocks. The last being a scam in which shares acquired for pennies are then illegally sold to overseas or domestic retail investors.
Other schemes typical of Penny Stock scams include spam e-mails and junk faxes that tout ridiculous and fraudulent claims, crooked newsletter writers who promote a stock for a fee. Even message boards swarming with “buy now” postings about a Penny Stock from anonymous, paid posters, fake or misleading press releases issued by the company, or reservoir rooms full of cold-callers targeting naive, elderly, or foreign people, all in attempt to drive up the share price while the insiders sell.
While not all Penny Stock that are listed on the splendid Pink Sheets or the OTCBB are fraudulent, one article in a leading magazine estimated that “chop stocks make up to perhaps half the 85 million-share daily volume of the OTC Bulletin Board.”
Though some websites continue living and claim to offer unbiased research and recommendations. They will normally charge a nominal fee for access to their websites, and claim not to accept payment or shares to feature a company in their newsletters or say even the websites.
It could be noted for Penny Stock however that not a single conventional financial media outlet, from the Wall Street Journal to the stock listings printed in local newspapers, covers OTCBB or Pink Sheets stocks, apart from the occasional warning tale.
William Smith
http://www.articlesbase.com/finance-articles/what-is-a-penny-stock-80989.html
Understanding Stocks
Understanding stocks is important to avoid risks. There are several types of stock markets today, including Forex, stock market and the penny stocks. The stock shares are often traded sometimes at smaller percentage based on the current trends. In penny stocks sometimes, the shares reach up to $5. Commonly stocks include high risks.
Yet the smaller trades or shares can turn to rewards although the stakes are high.
Shocks allow you to invest in organizations or companies around the world. You want to understand how to works so that you reduce your risks. Stock markets compares to the
Penny stocks, i.e. when you invest at the right time, or when the market is high you may make a couple thousands dollars.
At what time traders invest in penny stocks, i.e. before they invest the traders should invest some time by becoming acquainted with the “Northern Markets.” You can cut back your risks dramatically by familiarizing yourself with the markets and trends in Forex, stock market or penny stocks. Investments in stocks are usually swift, i.e. the stock markets often move quickly. Keep this in mind so you can keep up with stocks.
When you are ready to get in on penny stocks, you may need to open an account at the stock sites online Most times, traders that invest in penny stocks usually open a, “BC,” or “Brokerage Account.”
This is because the traders have a broker. The broker usually charge nominal fees that you pay from selling or buying stocks. Brokers usually receive nominal fees only. That is brokers do not keep you informed in regards to stock markets, high/lows, bids/asks, etc. You have to keep up with the changes in the stock market on your own.
Learn the best time to buy and sell stocks before you sign up for an account so you can reduce your risks and know what you are getting into.
Stock Risks:
Risks in stock market exchange or penny stocks often include stock ads that profess to give you free stocks. Other risks comprise the low trades and the visibility in stocks. In summary, take time to learn about stock markets before you get involved.
Martin Lukac
http://www.articlesbase.com/investing-articles/understanding-stocks-116310.html
