Why You Must Create Your Own List of Good Penny Stocks

Why You Must Create Your Own List of Good Penny Stocks

Penny stock trading is an intense and competitive field of investment and good penny stocks are not easy to find. If you think all the people on blogs, forums and distributing newsletters are providing good penny stock picks out of the kindness in their hearts, I’ve got some beach front property to sell ya.

Unfortunately, penny stock fraud is rampant and pervasive. The penny stock market has been a thorn in the SEC’s side for decades and the Internet has only made it worse (SEC stands for the United States Securities and Exchange Commission).

Because most penny stocks are traded via Over-the-Counter quotation services like the Pink Sheets and the OTCBB (Over-the-Counter Bulletin Board), many of them don’t need to file with the SEC and aren’t legally required to provide a certain set of public data.  How do you know a penny stock really deserves to be considered a good penny stock if there is no verifiable data on it?

This makes it easier for unscrupulous brokers and fraudsters to contrive and manipulate data on penny stocks. It also makes it difficult for novices to obtain substantial, verifiable data on the companies whom these penny stocks represent.  Thus we have several micro cap fraud schemes to watch for when we engage in penny stock trading.

Some examples are the pump and dump and the chop stock. The pump and dump is usually the origin of a stock someone on a forum is hyping and is very often the purpose of a penny stock newsletter. They artificially hype an unknown stock so that a crowd of novices will buy it up fast, temporarily inflating its value. But as soon as they successfully manage to cause its value to jump, they dump it.  This is possible with penny stocks because their values are so low to start with and in general their values are highly volatile compared to blue chip stocks.

The chop stock is when an unscrupulous broker buys shares of an ultra low value nano stock at a discount then turns around and puts the hard sale on a novice investor.  The investor thinks the broker is just executing his or her trade, when in fact the broker is scoring a profit off of the poor newbie penny stock trader.

So you see why you must learn to do your own research and due diligence in creating your own list of good penny stocks.  You can make money from home with good penny stocks; but despite what hype you may come across, it isn’t an overnight shortcut to get rich. It involves real work.

More Nano Stocks Articles