![]() ![]() Stick with stocks that trade at least 100,000 shares a day. Focus only on penny stocks with high volume Leave shorting penny stocks to the pros.Ħ. Another problem is that it’s difficult to find shares of penny stock to short, especially those that made huge moves based on hype and newsletter tips. Penny stocks are too volatile, and if you’re on the wrong side of the trade, you could easily lose 50% or more on a short squeeze. ![]() ![]() Sykes says large rings of the same people run promotions using different press releases and companies, including the reappearance of a notorious stock manipulator who was first convicted for an email pump-and-dump scheme when he was in high school.Īlthough shorting pumped-up penny stocks may seem attractive, don’t do it. There is no reliable business model or accurate data, so most penny stocks are scams that are created to enrich insiders.” “The companies are trying to get their stock up so they can raise money and stay in business. In the murky penny-stock world, don’t believe what you hear from companies. Considering that the penny stock you’re in might be getting pumped up, take any profits and move on. Unfortunately, many traders get greedy, aiming for a 1,000% return. If you make that kind of return with a penny stock, sell quickly. One allure of penny stocks is you can make 20% or 30% in a few days. “They are being compensated to pump up the stock, and they rarely tell you when to sell. “Most newsletters don’t tell you the truth,” Sykes said. Reading the disclaimers at the bottom of the email or newsletter, which the SEC requires them to do, will usually reveal a conflict of interest. Sykes says there is a difference between stocks making a 52-week high based on an earnings breakout and stocks making a 52-week high because three newsletters picked it. There is nothing wrong with wanting exposure, but almost all penny newsletters make false promises about their crappy companies.” “If you read the disclaimers at the bottom of the newsletters, they are getting paid to pitch a stock because their investors want exposure for the company. “The free penny-stock newsletters are not giving you tips out of the goodness of their heart,” Sykes said. Instead, Sykes says, focus on the profitable penny stocks with solid earnings growth and which are making 52-week highs. Think of penny stocks as inmates in a prison that you can’t trust.” “You can’t invest in penny stocks as if they were lotto tickets, but unfortunately that’s what most people do, and they lose again and again. Timothy Sykes, a penny-stock expert who trades both long and short, says you must not believe the penny-stock stories that are touted in emails and on social media websites. So, if you find yourself on the receiving end of a telephone call from a penny-stock promoter, or you spot an advertisement that promises dollars from your pennies - and you still decide that maybe penny stocks aren’t wooden nickels, just remember these 10 rules: Read more: Simple rule: Don't buy a penny stock.Įven with these clear dangers, some people insist on trading the pennies. Penny stocks and their promoters also tend to stay one step ahead of securities regulators, though just last month the Securities and Exchange Commission charged a Florida-based firm, First Resource Group LLC, with penny-stock manipulation. Read more: Stock touts prey on investors' inflation fears. Penny stock promoters make sure to attach a disclaimer to their email, Twitter, or Facebook page, and take advantage of this language to embellish and deceive. Read more: 5 strategies if you have less than $3,000 to invest.) Dollars and sense If the stock reaches $1, you’ve made $7,000, doubling your money. For example, say you buy 10,000 shares of a $.30 stock for $3,000. With a relatively small investment you can make a nice return if - and this is a big if - the trade works out. For investors who can’t afford shares of Google or Apple, the potential gains from trades like this are too good to pass up. ![]()
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