As you know, penny stock trading is quite precarious. The truth is, it is usually the most risky trading strategy of all. And it’s also extremely lucrative. Nothing can beat being a proprietor of stock options, whose stock price moved from $0.14 to $22 in a couple of weeks. Although not every penny stock investing is the same. You will find as many strategies as there are traders, though we can easily identify 3 major tactics which are the most prevalent. You certainly should think about choosing one of these, and then improve it further to fit your investing style.
1. Cheap Stocks and Shares on Major Stock Markets
By common explanation, the stock shares of small cap stocks are actually buying and selling below $5. You can find really numerous stocks and shares like that on big stock markets, such as the London Stock Exchange (NYSE), Pink sheets. Or American stock exchange. Trading these types of small cap stocks is equally as secure as buying and selling any stock on these trades. Stocks and shares listed on major trades need to have very stringent reporting prerequisites so that you can make sure those organizations mean business. They aren’t some disguise businesses started for whatever doubtful reasons, but proven companies with good reputable past as well as a future.
More or less everything may seem safe more than enough, or otherwise not riskier as compared to regular trading and investing. On the other hand, you need to think about one major disadvantage before deciding to stick to the path of investing cheap shares on major stock markets.
2. Stocks and Shares on Over-The-Counter Markets and Pink Sheets
On over-the-counter (OTC) trading markets and Pink Sheets, you will not find firms that were once major but have dumped from grace. Most of these small cap stocks are generally small startups having a stock price below $1. There are millions of them, and you can’t ignore the analysis essential to remove that 95 % of them that are worthless. OTC cheap stocks have other types of risks once and for all.
3. Use the Pump and Dump
This is, without doubt, the riskiest method. Small cap stock buying and selling get all the negative press simply because of the pump-and-dump strategies.
Pump-and-dump is a very typical and underhanded (even lawbreaker) activity exactly where con artists buy the majority of stock shares of a substandard quality OTC cheap stock, and then they publicize it greatly, so that naive traders buy the stock options too, thereby increasing the share price, you must join some OTC Message Boards for more information about it.. Once the stock price has rocketed, those counterfeiters simply promote their stock shares, leading to the instant collapse of the stock price, leaving the traders with a useless penny stock investing, unable to recoup.
Whatever strategy you ultimately choose, always remember that you’re sailing the riskiest oceans of trading if you’re coping with penny stocks.