Pros and Cons of Investing in Penny Stocks

When you think of trading penny stocks, the major stock exchanges normally come to mind. Such as the the New York Stock Exchange (NYSE), the National Association of Securities Dealers Automated Quotations (NASDAQ), or the American Stock Exchange (AMEX).

What exactly is a penny stock?

A Penny stock is a low priced security for a small company with a market capitalization of under $500 million and usually traded in very low volumes and amounts. Penny stocks also trade on other OTC or  “other the counter” exchanges, like the OTCBB and Pink Sheets.

Due to the low trading volumes, penny stocks are a profitable investment option that comes with a sizeable amount of risk.

According the Securities and Exchange Commission, potential investors in penny stocks should be aware of the fact that due to the low trading volume of these stocks, it is possible that an investor won’t find a buyer for their shares. Finding accurate price quotations are also difficult making it a strong possibility that an investor can lose their entire investment. This is the inherent risk.

Penny stocks do carry a certain appeal for adventurous investors.

Chances are however, a new investor looking for a potentially lucrative short term investments with a low starting price will run across the penny stock.

The allure and excitement comes from the fact that at such low prices any changes are often measurable in hundreds of percentage points in a given day or two. An investor’s stock value can literally grow to double or even triple the original investment amount!

Conversely, the price of penny stocks can plunge in value just as quickly. New investors would do well to avoid making penny stocks a major part of their portfolio.

Also, due to the low listing requirements on exchanges like OCTBB and Pink Sheets, many companies are not really considered safe investments.

Many of the companies listed on alternative exchanges do not have enough financial history to be able to accurately determine if they would make a good investment or not.

In some cases, these companies that are considered to be penny stocks are either new companies or are in some cases dangerously close to failure.

Unfortunately, some new day traders have even taken to artificially manipulating the stock prices by buying up large amounts of a stock which in turn, convinces individual investors of the need to buy.

As most of these stocks are not in great demand, an investor will have to lower the asking stock price in order to entice an investor, often at a financial loss.

Not every company that trades for “pennies” on the stock exchange should be considered fraudulent, however. Some are simply small companies trying hard to grow their business and are working to get up on the larger market exchanges. Searching through the fraudulent companies to find the truly reputable companies capable of helping an investor turn a large profit may not be worth it.

Investors with low investment income may be convinced that just one good trade can double their investment, but in the end an investor is better off choosing an investment from a company that they have researched thoroughly and are convinced that this company’s stock pricewill grow.

Thank you for reading my article,

Cheers!

Tips On Penny Stock Investing

Are you interested to double your money every 27 days? You can do this in Casino where probability of success is very low. Here we will discuss a method where more 70% people are earning more than 47% per trade by investing in stock market.

There are also several possibilities in stock market investment like day trade of stocks, future and option trading, over the counter stock trading, penny stock trading etc.

If you follow classical value investment model for investing stock market, you cannot really multiply your money overnight. To make money quickly, you need to invest in option with proper stop loss and day trading. You can also apply the same concept of future trading for Forex and commodity market.
In this article, you will learn how to pick hot small and madcap stocks because invest in penny stocks gives you maximum profit margin and less risk because you are not committing large sum of money.

What are the challenges in investing in penny stocks?

1. Picking top penny stocks is an approximate science and art and there is a much higher risk when investing in penny stocks.

2. Information available for penny stocks versus those traded on the New York Stock Exchange.

How do you go about finding the top penny stocks?

1. The best way to pick the profitable penny stocks is to combine your own research with professional share recommendations.

2. Before investing real money, practice stock trading on paper.

3. You should subscribe to few top quality penny stock newsletter and financial newsletters.

What’s the most recommended method for penny stock investment?

There are many online penny stock selection services available, you can join them but I found most of their services are not very reliable due to insider trading.

Here is my advice for penny stock investment to your success in wealth building

a. Learn proper money management and risk management while investing in stock market

b. Invest in penny stock just like investment in your own business

c. Do not influence by your emotion.

d. Make a proper investment goal.

Author: Arindam Chattopadhyaya
Article Source: EzineArticles.com
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Penny Stock Earnings Claims – Too Good to Be True?

I have been a trader for most of my adult life, which to date has been 52 years. I have traded a variety of investment vehicles at both the institutional and retail levels. In short, I have a pretty good idea as to the nature of trading. Which is not to say that I know everything about trading, that would be a tall order to fill.

But something has been bothering me lately, and it’s the outrageous claims that purveyors of penny stocks are claiming. In looking advertisements for these stocks this morning I came across some astounding claims; one firm promised 3000% return on their stock investments, another firm touted a 900% return on their investment choices, and yet another firm claimed day 1200% rate of return on their investments. Common sense tells us that returns that border on astronomical are highly unlikely. After all, if it were possible to attain these returns why are all investors not fully invested in these investment schemes?

Penny stocks are generally traded on the “pink sheets” and thus are not subject to the stringent reporting requirements the principal exchanges require. For this reason, stockbroker’s are allowed to make claims that would otherwise be illegal for members of the New York Stock Exchange or the NASDAQ to publish. Of course, you do not see member firms of the major exchanges touting outrageous rates of return on their investments; it is simply not allowed.

So why do these penny stock firms tout such extraordinary rates of return on some of their investments? The answer is a simple one; because they can. These fantastic rates of return are designed to entice unknowing investors into plunking their hard-earned money down on these risky stocks, which are among the riskiest investments in the investment continuum. Depending upon which a scientific study you read, 8 out of 10 of these stocks fail within two years of going public. Granted, a few stocks perform quite well, but discerning exactly which stock will skyrocket in price is dicey business. It is difficult, at best, for even the best penny stock firms to determine which stock will turn in excellent performance.

So I object to the use outrageous claims that these stock firms trumpet when advertising their services. The truth be told, these stocks are among the riskiest investments you can make and the vast majority of this class of stocks end up the worthless. In my opinion, these ads are misleading and would have the unsophisticated investor believe that all penny stocks are real moneymakers. Nothing could be farther from the truth, and I feel like purveyors of this class of stocks should disclose this fact to potential investors.

Further, there can be some irregularities in the actual trading of these penny stock issues. Since they are traded on the pink sheets, there is often a question of who is making a market in these issues. Often times, the firm making the market in these stocks is also the firm buying the stock back from investors. This is, of course, a bona fide license to steal. Oftentimes, there is a wide gap in the bid and ask prices when buying and selling these stocks. The differential between the bid and ask prices is little more than pure profit for the firm involved in buying and selling the stock. As I have said, the same firm may, in fact, be both buying and selling the stock simultaneously. So the spread between the bid and ask price is often pure profit for the firm involved.

On a final note, many penny stock companies higher public-relations firms to distribute dubious claims as to the fantastic success the product the penny stock company is selling in an effort to pump the price higher than might be expected. This make sense because oftentimes these public-relations firms are paid in stock from the firm and it is in their best interest to inflate the stock price to increase their profits. This technique is often referred to as “pump and dump.” Penny stock investing is rife with firms engaged in pump and dump activities, so any information received from third-party sources promoting penny stocks should be taken with a grain of salt as its accuracy can be dubious, at best.

My recommendation is to avoid penny stocks, no matter how enticing they may appear. All that glitters is not gold, and penny stocks are certainly no exception to this rule.

Author: David S. Adams
Article Source: EzineArticles.com
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The History of the Stock Market – Reveling the Benchmarks

Stock market is the most powerful financial institution all over the world. In fact it is the most dominant trade that drives the economy of the world. Whether it is recession or boom in the economy, the stock market is considered to be primarily after it. There are several stock exchanges trading all over the world. Most of the developing and developed countries have their individual stock exchanges influencing their own economy. But the stock exchanges of the biggest world’s economies affect the overall global economy.

When was the first stock market formed? The answer to this question is a topic of huge debates. Historians debated over this issue but no universally accepted solution was found. But the US stock exchanges have a clear view and recognized history. Initially the government of US started the stock market during the World War I. Bonds were traded to fund the war. These bonds were open to private investors. During that period major banks were also working on the similar project. But in the year 1792, the Wall Street recognized as the center for stock trade. In this year a group of 24 merchants entered into an agreement called as “Buttonwood”. They formed the first organized world stock trading center. This organization was named as New York Stock and Exchange Board which is now known as New York Stock Exchange.

The London Stock Exchange was formed much earlier than the NYSE but it was not well organized to provide enough ground to be called as center for world stock trading. The stocks in London were traded in the coffee shops in the streets of London. After its establishment NYSE became the powerhouse for stock trading. Over 200 years NYSE is the most powerful financial institution and leader among all the other stock exchanges.

In the year 1849 another stock exchange came up in US by the name of American Stock Exchange. This exchange was used by the by companies that did not find space with New York Stock Exchange. But this exchange was taken over by another exchange National Association of Securities Dealers Automated Quotation (popularly known as NASDAQ) in the year 1998. NASDAQ was the first exchange formed in the year 1971 that provided electronic platform for trading stocks. NASDAQ is now the largest exchange in terms of share traded and companies enlisted. Most of the exchanges offer the trading electronically. And for all this the credit goes to NASDAQ innovations.

Since the ups and downs are also the part business. Stock Market too saw both the phases. Moreover this market was primarily was called to be accountable for the same. The most terrifying slump in the economy was the crash of 1929 that then gave to the Global Great Depression in the World’s economy. Another example could be the present time when we all are facing global slow down. Recession has spread its wings all over the world. Consequences can be seen the stock market and somewhere this market has influencing share of responsibility for the call of this recession. The stock market experienced the boom phase in the 1990’s when the technology was growing at the lightening fast speed. It was then where the stocks of the companies not related to technology were also touching the sky.

History of the stock market revels that how the different economic phases can be dealt. Whether it is the time for slowdown or boom, trading in the stock market can be learnt from the history.

History of stock market is quite interesting. There are several benchmarks in this long history when different stock exchanges in the world were formed.

Author: Micheal James
Article Source: EzineArticles.com
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Are Penny Stocks Appropriate Investments For Most Individuals?

It’s not unusual to see a stack of ads touting how lucrative penny stock investing may be for some individual investors. As I was researching the Internet to write this article, I came across outrageous profit claims; these claims were far in excess of the very best year on the New York Stock Exchange. It sounds great! Who doesn’t want to make a wad of money?

Before you dump your life savings in this market though, there are some important facts of which you should be aware.

1. You can easily become a victim of an overly biased recommendation as many of these stocks are hyped by specialized firms who make their business by pumping low priced stocks up. These firms use a variety of mediums to accomplish their task, including newsletters, the Internet, and various media outlets. As a veteran of the stock industry, I can tell you that most of these firms are paid in shares of the stock they are pumping. Quite simply, they have a vested interest in pushing the price of the stock higher regardless of the merit of the individual stock.

2. Speaking of the merit of the individual stock, one of the greatest disadvantages of these stocks is the complete lack of transparency in company reporting. The vast majority of penny stocks are not regulated by the Securities and Exchange Commission. This means the stock companies do not have to submit audited reports of their assets, changes in overall cash position, and a variety of other reports that regulated firms are required to submit on a quarterly basis. Short of and physically visiting the firm, there are a few methods for verifying information about these stocks.

3. Another major issue in the penny stock at market is liquidity. Some stocks are very thin and it is difficult to exit at a specified price. Additionally, there can be a very wide bid and ask spread to contend with. The reason for the wide bid and ask is varied, but it is not unusual for one small investment bank to be on both sides of the spread. This can cause a major problem for investors has competition to narrow the bid and ask spread is zero.

4. Since these stocks are not subject to reporting requirements they are often in financial straits and are not required to disclose this fact to potential investors. Depending upon which source you choose to believe, as many as 7/10 penny stock companies are bankrupt within three years. Of course, penny stocks usually have limited assets. As an investor you will probably get very little in the event of the companies liquidation.

5. Since most that penny stocks have a very short history and there is no financial transparency in their reporting requirements, it can be very difficult to pick the proper stock. Most penny stocks are bought on recommendations from either honest purveyors of penny stock information, or from “pump and dump” firms who are hired to create a media blitz for the penny stock.

There is a considerable amount of money made in the penny stock market, though most of it is not made by investors. For the above reasons, it can be very difficult to make a living in this treacherous environment. On the other hand, if an investor could find a honest purveyor of penny stock information, one who has experience and access to quality information, I would imagine that you could make a considerable amount of money in this market. Of course, there seem to be many obstacles to success in the penny stock business, which is why it enjoys a less than stellar reputation among professional investors, who typically avoid this section of the market like the plague.

But as I have said, under near-perfect conditions there is money to be made in the penny stock business. If only the problems of financial transparency, company history, and then markets could be overcome by knowing or hiring a true expert in the penny stock arena. To me, it would appear to be a difficult arena in which to compete.

Author: David S. Adams
Article Source: EzineArticles.com
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Stock Market Indices and the Stock Exchange

The analogy of the world’s stock markets can perhaps be traced to the town market place, where all villagers brought their goods to trade and sell. Over centuries this has led to the present stock exchange. Stock market trading in the United States can be traced back to over 200 years ago, when the colonial government was forced to finance the war by selling bonds and government notes, promising to pay back at a profit at a later date. Around the same time private banks began to raise money by issuing stocks, or shares of the company to raise their own money. Further in 1792, a meeting of twenty four large merchants resulted into a creation of a market known as the New York Stock Exchange (NYSE). The merchants agreed to meet daily on Wall Street to trade stocks and bonds. Soon an average person also realized the value of investing in stocks in comparison to traditional assets like land, house or Gold.

In a stock exchange the stock or shares of companies are listed and can be traded i.e. bought or sold. Depending on the economic performance of the company and its financial health as well as economic and investment scenario in the country, where the stock exchange is located, the shares listed have a certain market value. These share prices fluctuate depending on a number of factors including market health, investment climate and company performance.

On a stock exchange we have something called the average value of all companies listed. This is the index number. It’s a statistically calculated reference number. It is calculated on a daily basis. This reference number is the stock index of that stock market for that day. This number varies and has a liquidity of its own .In fact in case it is plotted on a graph it will show a zig zag result. But a central line through it will show whether the stock is stable or going up or going down. There is lot of talk of the market going ‘up’ or going ‘down’. When the market goes up it means that the ‘bulls’ are in action and if going down the ‘bears” hold sway.

The index number of the stock exchange is a summary of the market and the financial health of a nation. It encompasses the total value of the stocks that are listed. Presently some of them have become a bench mark for evaluation of a nation’s financial health. They are often referred to when an investment is to be made or loans granted to a nation.

Two of the most famous market indices in the world are American. They are Dow Jones Index and SP 500 index. Charles H. Dow takes the credit as the man the Dow Jones Index in 1896. At that time Charles calculated the index by a simple method. He added all the stock prices and then divided the total by number of stocks listed. Presently the system is a little more complex and the calculation takes into account the market weightage of the stock. Also the Index refers to the heavy weight i.e. stocks that have the greater value and market capitalization.

Other market indices are also well known.They include the FTSE of Britain, CAC 40 of the French republic, DAX for Germany and Nikkei 225 for Japan. Among the emerging markets NSE Nifty is important from India.

An index is an imaginary number that represents portfolio of securities that are listed on the exchange. This number is like a reference bench mark that is used by investors and CA’s and money managers to assess the state of health of the financial market of a country. The creation of this benchmark has also encouraged a large number of investing population to opt for the first time in investing in stocks, despite having very little financial knowledge. There are now indexes for technology stocks, pharmaceuticals etc also. In 1985, the NASDAQ introduced its own index to compete with the S&P. The Nasdaq 100 contained more companies from the technology sector. The NASDAQ itself has been growing in importance as both the computer and the internet have taken technology inside peoples homes.

Presently the names of indexes such as the Dow Jones Industrial Average

(DJIA), S&P 500 and NASDAQ composite have become part of our everyday vocabulary. For example, two of the best known indexes for the stock market in the United States are the Dow Jones Industrial Average and the S&P 500 index. These are Global standards.

Indexes help track the performance of the market. So, if you hear that the S&P 500 was up 5%, you know that the stock market (as represented by the S&P 500) has gone up around 5% in value.

The impact of indexes on investing is huge. This is because these indices from Tokyo to New York have brought about greater transparency all around. Other prominent indexes include the DJ Wilshire 5000 and the MSCI EAFE (foreign stocks in Europe, Australasia, Far East). Each index has its own methodology for calculation and is usually expressed in terms of a change from a base value. Thus, the percentage change is more important than the actual numeric value.

Presently Standard & Poor’s 500 is one of the world’s best known indexes. This index is a bench mark for a lot of experts around the globe. The challenge for investors presently is not to get reliable market information, but how to utilize the information available.

Author: Madan G Singh
Article Source: EzineArticles.com
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Stock Market Experience

With the increase in purchasing power and surplus income of people, the stock market has assumed a very important role in the lives of individuals – whether working in an MNC or running a business. The name of Mumbai conjures up the image of the Bombay Stock Exchange (BSE) with stock traders bidding for stock prices at the top of their voice. Apart from stock exchanges and bidding, much more is involved in stock market trading – it is related to individuals’ innate nature of profit making.

This article educates readers on the simple terminologies related to the stock market – it is a place where individuals or companies sell/purchase shares at a price agreed upon by both parties. Organizations may want to raise capital for expanding their business. For this, they first get themselves listed in the stock exchange. Then they issue small shares of a portion of their capital and sell those to individuals or companies through the stock exchange. In other words, stock exchange facilitates the buying and selling of stocks, called stock trading, which may happen at a real or virtual exchange. Trading happens when a potential buyer bids for a certain price on the stock and the seller agrees on that price.

The stock index indicates the price of any stock at a given time. In New York Stock Exchange (NYSE) and BSE bidders and sellers carry out stock transactions on the floor; these are physical exchanges. The NASDAQ is a virtual exchange or an online stock exchange, where buying and selling happens over a network of computers and is known as online stock trading. Instead of a physical index an online stock exchange uses an online index to list its share prices. Stock traders are individuals who invest small amount of capital in stocks. Stock brokers are individuals or firms who hold stocks and trade them to smaller investors, thus having a role in temporarily controlling the prices of shares. The demand-supply gap determines the price of shares in the market. Stock trading is largely dependent on prevalent economic conditions; it rises with the booming economy and falls with inflation grasping the world order.

Be it a businessman, corporate personnel, or housewife, buying and selling of shares can be an easy way of earning (or as a matter of fact losing!) money sitting at home. This has been made easier through the services of various brokerage firms. They are professionals dealing in share trading and it is advisable to use their services when entering the stock market. The fluctuations in share prices are displayed in stock indices on a real-time basis. The time for which one can bid in the stock market is called its trading hours; for example, for NASDAQ it is 9:30 am to 4:00 pm. Some individuals trade within the trading hours of a single day, that is, buy shares when the market opens and sells them before the market closes. They are known as day traders who follow day trading of stocks. An institutional day trader works for some financial organization, while a retail day trader works on his own or with partners.

Online stock investing has opened up new vistas for share trading for common man. With information on cheapest stock trading now only fingertips away, they can learn about companies and the trends in the stock market to make prudent financial investments. In short, the stock market and trading in shares has become a second nature for the urban population of today’s world.

Author: Amit Malhotra
Article Source: EzineArticles.com
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What If the Stock Market Crashes?

If you are not familiar with the stock market, join the club! There is so much to learn about the stock markets. For instance, what’s a stock quote and what does it really mean when the stock market crashes? The stock market has been around for years and yet there are so many people that do not understand how it works, what it shows and how to watch it. With the slowly declining economy, the entire world has been up in arms about the stock markets. We’re finding out more and more how dependent the markets were on the United States. Who knew that American markets had such an effect on international markets? Now is the time to really explore what the stock market is and why it’s important to understand if it crashes!

The stock market crash in the late 1920s sparked The Great Depression. Many people were hurting due to the poor economy during that time. But before dwelling on the Depression and the market crashing, several question come to mind, such as what exactly is the stock market? Do we all need to invest in it? Well for starters, a “stock” is simply a “share” in a company. The stock market is the collection of stocks, or shares, from companies listed in the stock exchange. But do we need to invest in it? The answer would probably vary from person to person. Everyone does not participate in the stock market. If you’re the type of person that likes to see your money, then perhaps investing in stocks is not for you. However, if you’re the type of person that would like to see your money work you, investing can be the way to go. It is all up to you and it can be very profitable if you become savvy of the markets.

When anyone talks about the stock markets, the first thing that should come to mind is the New York Stock Exchange, with what seems like millions of people running around with their arms in the air, talking on phones and shouting over one another. The chaos that is the NYSE seems like such a nightmare, but in actuality, it is the spirited culmination of the stocks being traded from all over the country. In the beginning of the day, there is the Opening Bell and at the end of the day, is the Closing Bell. Sometimes, celebrities can be seen ringing the opening or closing bells. What a treat that would be, to start the day of trading? It would be a phenomenal experience to be able to start the day of trading on the NYSE. Likewise, to close the day would be just as great.

Investing in stocks is a personal decision and it could be a great way to see your money grow without doing much work! With today’s markets, it is best to learn as much as possible about the stock market before taking the leap of faith with your money.

Author: Alan Snell
Article Source: EzineArticles.com
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A Novice’s Guide to Penny Stocks

A novices guide to Penny stocks: Penny stocks are low priced speculative stocks, but these stocks are dealt in over the counter (OTC) market. Abiding by the Securities and Exchange Commission of United States, the upper limit of cost of the penny stocks is determined at 5 dollars per share and in reality the price of these shares is well below this and now and again a mere one cent. Even though the penny stocks are normally traded in the ‘over the counter market’, nevertheless these can also be dealt at New York Stock Exchange or National Association of Securities Dealers Automatic Quotation.

How to embark on trading penny stocks: Although it is a common impression that the penny stocks are dodgy but at the same time as the shares values are normally low, the chance associated is also minimal. A great many people see speculating as a chance to watch share-trading techniques and simultaneously see that not every penny stocks are dodgy. Even though the investment in penny stocks may not substantially improve your financial condition, the chosen investment funds may give you some profit.

If you have made up your mind to invest a tiny quantity of funds in penny stocks, you will need to approach a trader to commence. Then as per SEC guidelines, you need to supply a request in writing to the dealer and after approval you may buy the stock from the broker. You really need to consult with the trader and should commit carefully but your broker will tell you the placing of the stock and brokerage firm.

Before speculating in penny stocks get hold of the Securities department of your state and obtain details about the agent. brokers trading history|The past history of the broker] supplies essential details about the permit and any disciplinary actions taken against the agent.

Once you have made up your mind to deal with a broker, get all the information regarding the penny stocks, brokerage and other terms and conditions from the agent in writing. You ought to also keep the records of all the papers provided to you by your agent and ask them to provide you with the papers citing the recommendation for obtaining or trading of any penny stocks. Once you have done this, take an impartial opinion about such stocks and shares from another broker and decide carefully before making any investment. Your broker ought to also furnish you with a monthly account mentioning the stocks or shares you have in your personal account and their values.

Securities Investor Protection Corporation coverage: Brokerage firms dealing in penny stocks will generally have SIPC Coverage. Then if you find the brokerage is incapable to pay you your dues owing to bankruptcy, the SIPC guarantees that the client possessed stocks held by the brokerage firms are paid. SIPC insures the complete client held certificates held by the brokerage, nonetheless in case of a hoax, the insurance underwriter is not responsible to pay the amount of money.

Although investment in penny stocks is not quick rich type of schemes, the investment funds may supply a chance to learn dealing. You ought to take at least a second view about the particular company before investing in any kind of stock.

Author: Gregor Prajs
Article Source: EzineArticles.com
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Penny Stock Trading – Shocking Pumping and Dumping Frauds

Penny stocks are great investments. You might be a subscriber to a penny stock newsletter. Penny stocks get rich quick stories abound on the internet. I had come accross a website that claimed that they had made a whopping 10,000% return on investment with a penny stock. I believe them. These type of opportunities don’t come everyday. So, you should not look for them. But if you get this once in a lifetime opportunity, just grab it!

You might have come accross many stories that say how an investment of just $0.1 per share in a stock turned into $100 per share of that penny stock, giving you a return of 1,000%. Now, these are nice stories. Many of them no doubt true. But the problem with most of the penny stocks is that most don’t have a liquid market. What this means is that most of them have a low trading volume and the liquidity quickly dries up leaving you high and dry with your investment at the wrong time!

Penny stocks are usually defined as those stocks that are priced under $5 per share. These are not traded on the US Stock Markets but are listed on the pink sheets. What this means is that most of them don’t pass the strict registration process that a normal stock has to pass before being listed on New York Stock Exchange (NYSE), NASDAQ or AMEX.

Penny stock trading can be profitable. I am not disputing that fact. But there are stories that circulate that most of these stocks get hyped in email newsletters that many people subscribe to with a picture of this stock jumping from let’s say $0.15 to $15 in a matter of few days.

When most of the subscribers read about a great money making opportunity in the making, they get excited. Without any due deligence, they buy that stock on the recommendation of these newsletters. Now, most of these penny stock newsletters have build a list of thousands of subscribers over time. You can well imagine, when thousands of people try to buy the same penny stock at almost the same time, the price jumps. Viola, the penny stock price jumps as predicted. This impresses many novice investors.

Soon, it indeed reaches where it was predicted to be. Then the market suddenly dries up as this sudden rise is not supported by any fundamental or technicals. It is just a product of market hype created by a few stock trading newsletters. This stock then drops like a rock with most of the investors losing their shirts along with it.

So, if you want to invest in penny stocks, you need to do some research about the liquidity of that stock. See, what the daily volume of that penny stock trading is! Now, sometimes, the penny stock company may have strong fundamentals supporting it, like good quaterly earning report, launch of a new revolutionary product, some breakthrough research. In that case, no doubt the price increase will be sustainable. However, you need to do your due diligence and research to make sure that you don’t become a victim of pumping and dumping.

As compared to stocks, currency markets are huge, It is being said, that currency trading is going to make many millionaires in this decade. You don’t need a large capital to start currency trading. You can open a mini account and start trading with $500. There are many good forex signal services in the market that you can use to trade forex. It is as simple as reading an email. There is no big one trade. Always remember, you grow your wealth slowly incrementally by using the power of compounding! Mastering currency trading is far more easier as compared to stock trading. You are only dealing with six major currency pairs as compared to thousands and thousands of stocks. You can trade forex with signals as well as a robot.

Author: Ahmad A Hassam
Article Source: EzineArticles.com
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