Are Penny Stocks A Good Pursuit For A Novice Investor? - My Thoughts About Penny Stocks

I’ve received a mail on my Facebook page from one of my readers. Here is his question:

“What are Penny Stocks? Would they be a good pursuit for a novice investor like me? Thank you for your advice”

Penny stocks are shares of small public companies that trade at low prices per share. Most of them have a damaged business model. In the United States, the Securities Exchange Commission (SEC) defines a penny stock as a security that trades below $5 per share, is not listed on a national exchange, and fails to meet other specific criteria.

Some investors make money with penny stocks by buying and promoting them. Because of the low trading volume, a few new purchasers are enough to boost the stock price. That’s a very unfair and illegal method. The SEC discovers and punishes such activities.

A second possibility to make money with penny stocks is reasonable to the low stock price. You can easily buy 10k or 50k of the stock capital. If your stock moves 1 cent up, you have a gain of $500.

For me is this no argument. Today we have real great leveraged alternatives like ETFs, CFDs, derivatives or options. With these tools, you can build your own leverage with the right underlying. It’s in my view safer and better way to leverage your return.

Finally, the third way to make money is to tell people how to make money with penny stocks. It’s a classical way to sell newsletters, research products, stock tips and so on. For me is this real trash. The biggest player in selling that bullshit is Timothy Sykes. He sells his life story and the dream to get rich with penny stocks. But his real money he made was with selling penny stock alerts, DVDs, etc. – In total a value close to a six-figure amount per month!

I would not recommend you to trade penny stocks or even to buy such newsletters or products that show you how you can make money with stock trading. It’s very dangerous and in the end you are alone responsible for your return – nobody else.

Keep in mind that some investors want to make money with you. It’s like playing online poker. The better informed and longer playing guys make money by fleecing the new ones and unknown investors.

If you have any further questions, to not hesitate to contact me. If you like my answer, please give me a Facebook Like. You can also subscribe to my free e-mail list or follow me on Facebook or Twitter.

Happy Investing!

Tom

How To Make Money With Penny Stock Alerts

The following article was provided by our guest blogger John Jordan from Pennystockdetectives.com. The site is a leading information source with focus on stocks under $10. I believe it should bring you some new ideas to sharp and improve your trading skills.

What are penny stocks? Beginners in the stock market may have this query. Here is a simple description of this term. Penny stocks are simple low priced and speculative stocks. Although it has been already said that penny stocks are low priced stocks, the maximum value of a stock so that it can be called a penny stock is variable and it depends solely on an individual. However, $1 priced stock is generally considered as a penny stock. Penny stocks are normally traded on over-the-counter market and are dealt in smaller exchanges.

Let us discuss something more about penny stocks. You can get daily alerts regarding this through the penny stock newsletters. There are various such newsletter providers who inform you when a certain stock is expected to gain massive gain in near future. In such conditions if you are subscribed to their service they may email you the news and alerts. Most of these organizations ask you to pay some amount of subscription money or many others may provide you with free penny stock alerts. Why these alerts are getting importance is due to the fact that when specific news is transmitted to any means, it may take some hours or so before they reach you. But, when subscribed to the alerts, you get instant information of any related market trend change or hot penny stocks picks directly to your email. Instant information regarding such stocks may help you get that one day high flying benefit. Although most of the times the information is regarding a short term or a day of sudden change in the market, sometimes it can even be long term stock investment information.

Many good company stocks are undervalued and these stocks are rarely recognized by the mainstream Wall Street. As soon as such a stock is identified in the market, the penny stock alert provider would send you an instant email regarding it. You may get a list of penny stocks to watch and select one to invest in. Sometimes you may gain enormous profit from the information gained from the penny stock news alerts. A penny stock market may inform you of the following.

• Big news that has just arrived and possess capability to bring drastic change in the market trend
• Any unusual momentum or volume in the market
• Stocks that are excessively promoted and thus creating massive buyers
• Certain suspicious insider buying of certain stocks
• Any buzz that may come out from the message boards, chat rooms, related to some community insiders
• High powered technical indicators and certain chart patterns
• Discovering companies that have potential of growth in future or may be even doing well at present but people are unaware of it

The factors discussed above can create a large cap NYSE stock to get hike up to about 10-30%. A penny stock can experience a positive effect of about 100% to 2000% due to changes in these factors. The hot penny stocks that are in positive momentum can earn you really good returns and so the penny stock alerts may act as a real boon to you if you are someone who wants to earn the other way.