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Trading
Methods Penny Stocks to Avoid There are many good penny stock investments available, which could turn a small amount of capital into a small fortune very quickly. However, to discover these you need to know what to look for and what to avoid. When searching for that one big payoff, steer clear of the following examples. 1. The Phone Salesman - Anyone who is attempting to sell you investments over the phone should be considered an enemy. They have high-pressure sales tactics, and effective, believable arguments. However, they are not doing you any favors, no matter how good they make an investment sound. They
are operating in their best interest to dump over-the-counter stock
on you, and the money you pay in will go into their own pockets,
or the pockets of their company. There
has never been a need for good companies that are going places to
resort to these type of tactics, but there has always been a need
for poor, sinking, or shady companies to do so. If you choose to
ignore this advice you deserve what happens to your investment.
You may also run into difficulty trying to find a buyer for your shares once you decide it is time to sell. 2. Very Low Volume Stocks - Without much trading activity it becomes increasingly difficult to buy or sell for the prices you want. As well, it becomes nearly impossible to get an understanding of where the stock price is heading, or to calculate fair valuations for the company's stock price. Not only that, but companies subject to low trading volume generally do not have a lot of positive interest. 3.
The Hot Tip Stock - There are actually professional promoters
who make a very good living generating and nurturing rumors about
some penny stock that's guaranteed to go through the roof.
The entire concept hinges on the rumor being spread from person
to person, at the office, over the phone, or at social venues. 4. Guaranteed Performance - If a stock is guaranteed to go up, it will almost always go down. Nothing is ever certain, especially on the stock market. When someone guarantees certain performance out of a stock, they may be a promoter, naive investor, self-serving broker, or have heard the guarantee from another source. In any case, don't believe them. Instead check into the company yourself and if you feel it is a good investment, you may want to proceed. 5. Sinking Ships - When a stock has dropped a lot you may think that, "it can't go any lower," or that it is "a good bargain." Especially with penny stocks, you need to avoid this type of thinking because many sinking ships don't ever rebound, and they can go lower, and they aren't good bargains just because they cost less than before. 6.
Commission Free - If you are interested in getting stock commission
free you may think you are saving money, but it generally means
that you are buying over the counter stock directly from a promoter
or the company. Either way, they take their own invisible "commission" from you, either by selling to you for an arbitrary amount which is unfairly high, or selling to you for the asking price rather than the bid price based on their own current valuations. 7. International Penny Stock - We're not talking about living in the U.S. and steering clear of Canadian stock, or vice versa. We are talking about penny stock issues from Africa, Australia, European, Russian, or South American penny stock markets. First of all, you won't be too impressed with the level of investor protection and exchange honesty in some of these regions, and you most certainly won't be too impressed with the broker fees you incur when trying to purchase internationally. Besides, if you can't find good penny stock investments in North America, you won't be able to find them anywhere else either. 8.
Warrants and Rights - These are not technically stocks, but
instead are derivative investments based on an underlying company's
shares. However, they often appear like penny stocks because they
sometimes get listed in the stock pages, and often trade for pennies.
It is unlikely that you will accidentally purchase derivatives, but make sure you know what you are trying to buy by understanding the listing criteria of the paper you are reading, or verifying your purchase with your broker. To get free information about investing in penny stocks visit http://www.pennystocks.com They offer information on the definition of penny stocks, getting started, benefits, risks and how to find a good penny stock. Peter Leeds, one of North America's leading Investment Coaches, is a self-made millionaire who has created his fortunes on the stock markets. He has also empowered thousands of individuals to do the same. His personal success and incredible ability to consistently pick money-making stocks has earned him a loyal following of successful investors and has generated significant attention from the financial world. Click here to return to TradingProfiles Home Click here to return to Trading Methods Article reprinted with permission from netterweb.com *DISCLOSURE:
This is not a solicitation to buy or sell securities. These are
NOT recommendations to buy or sell stocks or to invest or trade
in any stock, or any other financial instruments. The information
above is not intended to offer any professional investing or trading
advice. This website is not compensated by any of the companies
to promote their stocks. These are just personal opinions. Trading
Pro Files is NOT responsible for any investment or trading decisions
that anyone may make based on any information received from this
website, or any affiliated site, or from any links on the Trading
Pro Files website(s). When investing or trading in any financial
instrument, always excercise extensive due diligence, and investigate
any investment or trade completely prior to commiting any money.
Consult with a financial professional. Know your risk and understand
that any financial trading and investing inherently involves RISK,
and with this risk there is a potential to lose a substantial amount
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