Picking Penny Stocks

Trading in penny stocks is certainly one of the most exciting ways of investing money.

If you do manage to sift through the market and grab a good investment opportunity early on, you'll be watching your stocks rise from a few cents to a few good solid dollars.

But penny stocks, as with any investment, do carry risk, this much is inescapable - and beware if anyone tells you otherwise. It is a cut-throat game, with highs and lows and if you don't fancy that sort of thing stay well clear...

Rumor and speculation…

Penny stocks are that much more susceptible to rumor because of their small market valuation. Prices can often shift significantly when only a small handful of stocks have been traded.
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When a company share doesn’t have (much) liquidity, two problems occur:-

Firstly, there is always the possibility that having bought the stock, there simply isn’t anyone who wants to buy it off you. If liquidity is low, and you can’t find a buyer, then clearly the classic market rule of supply and demand will apply - and you’ll have t drip the price until finally someone does find it attractive enough to take a punt.
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