Penny Stocks

Penny stocks are volatile enough without broker scams, falsified company documents, and a lack of market knowledge. So how do you protect yourself to minimize your risk? If you are investing in penny stocks, you already know there is potential for turning a small amount of capital into a sizable profit. Whether you are investing a lot or a little into penny stocks, watch out for these red flags, it just might save you a small fortune. The Hot Tip - When you read or hear about a stock that is guaranteed to go through the roof, look out. Most investors that have this type of inside information would keep it to themselves. Sadly, there are people who get paid to start these rumors. This false tip could cost you if you do not do your research on the company before investing. Commission Free - Don't be fooled. Not many things are free and stocks are no different. What you are likely getting is stock directly from the company or a promoter who have already tacked on a little extra.

Guaranteed Performance -It is highly unlikely that these stocks will go up. More often than not this is a self-serving promotion tactic. Sinking Ships - Just remember that a 'good bargain' is relative. The price may have hit rock bottom because the company is going under. Be very cautious.

Very Low Volume - Simply stated, this is often the case with penny stock scams. It is extremely difficult to determine where these stocks are headed and it could be hard to sell.

The old cliché 'If it is seems too good to be true, it probably is', is a good motto when it comes to press releases, forum posts, various websites, and advise. No one likes to be sold, and when your broker, a salesman or anyone else seems to be pushy or over the top... run! There is good chance there is some shady activity taking place.

Always do your due diligence. Although there is a large degree of luck associated with penny stocks, if you have not researched your companies, you are likely to end up losing your hard earned money. Knowing these warning signs should only be part of your investment strategy. An investors goal is always to make a profit.


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Is it possible for people to really make a substantial profit using Penny Stocks, even to become millionaires? Certainly there are some people who make huge amounts of money with stocks, ordinary people who trade in their own time perhaps as a hobby rather than as a professional trader. It is very likely however that although they started on penny stocks they eventually moved up to other potentially more profitable stocks using larger sums of money once they felt they were more experienced, and had more money to spend. Of course the question then becomes how do you start making profits quickly in penny stocks with the least risk?

Before we answer that question, let us quickly define exactly what we mean by penny stocks. There are different precise definitions, but in general the phrase refers to low priced, highly speculative stocks which normally sell at less than $1 per share. They are very volatile and can rise and drop hundreds of percentage points in minutes, sometimes as much as 400%. This can of course be dangerous, but can also be extremely profitable if you know what you are doing.

Now that we know what penny stocks are, how can we quickly work out what to trade and when, to maximize our profits? Remember, normally only after we have made a number of trades using small low risk sums can we even think about making the kind of trades we need to make the big money quickly. In most cases traders simply have to put in the hours - and weeks and months and years - to become experienced in the market. Only after trading many times and analyzing the trends and results over a long period can a trader say he really understands trading stocks, and even then he will still lose on many trades.

However there are of course many shortcuts on offer. There are many "systems" available, ways to help you identify trends and profitable opportunities as they happen, but there are huge problems with most of them. The main problem is simply that any system still relies on analysing the historical trends, and this takes time and effort. However, there may be a new solution.

Two computer programmers have created a piece of software which performs scans of stocks looking for companies who are forming bullish trading patterns,  their penny stock  is about to increase. This software records historical information constantly and learns more and more over time, and every week it outputs recommendations of stocks it thinks should be bought and sold. These recommendations are only made when the software is confident in the outcome, based on the huge amount of data it has analyzed.