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How To Avoid A Penny Stocks And Shares Trick
When you buy penny stocks and shares, or any stocks at all that means you technically own a percentage however small of the company you invested in.
Penny shares are stocks that normally change hands for slightly less than $1, even as little as 1p. This part of the stock market is poorly regulated and so there is a not inconsiderable percentage of penny share fraud usually described as penny Stocks and shares Scam.
The Net is a breeding zone for Penny Stock Cons because information can be spread quickly and regularly with apparent authority. Forums, e-mails, are common sources. It is simple to be misled by what seem to be cast iron qualifications online which are not more than a con job. Fortunately the regulatory authorities have woken up to the far-ranging Penny Stocks And Shares Trick.
What does a penny share con look like
Probably the best known sting, is where a small set of people collaborating will purchase a large number of penny stocks at a really low cost. Then typically on the web through forums, e-mails, etc they let it be known the Company they have invested in is about to expand dramatically, or has found precious metal, or oil, or there’s extremely good news about to begin to break. Any lie to awaken interest. The gullible little financier sees the headed page this information is on, and is fooled into purchasing the low priced share. The demand skyrockets the stock, the speculators dump their stock before the truth that there’s no news comes out, and the trusting punter is left high and dry with stock whose worth will now collapse.
Remember all that glisters is not gold. Headed paper, a magnificent website can all be produced in a grimy small bedroom on a 5 year old laptop. A telephone can be answered and a background of office noise can easily be supplied by disc, giving the impression of a busy office. If you’d like to believe what you see or hear, then the perpetrator of the penny share sting will achieve success.
A penny stocks and shares scam called the Poop and Scoop is the exact opposite of Pump and Dump. What occurs in this situation is the value of the stock is sent plunging by extraordinarily negative stories, fake stories put out in the same way as before. As the price drops they buy, and then when the rumors are proved not to be true the share price increases, and they take their profit.
Like the Poop and Scoop is Short Selling before spreading the rumors. Short selling naturally is selling shares you don’t own, but have effectively borrowed from your broker. As these shares are sold the cash is credited to your account, but sooner or later you have to buy back the same number of shares you ‘borrowed’. This is commonly known as ‘covering’. The penny stocks sting works as the con-man is buying them back for less than they paid for them so keep the difference.
Then there’s front running, which is often known as insider trading. Here insiders or brokers get wind of good news and buy lots of shares before the reports breaks. This is not lawful.
Another unpleasant trick is with penny stock that has done nothing for months even years, and is known as Circular Trading. A group of folk who have got a number of broker accounts in other states sell and buy shares in that company between themselves. This makes the trusting onlooker think something is occurring in the company, and folk begin to buy the penny stocks again forcing the price up. The scenario then follows the pump and dump.
To avoid suffering a penny stocks and shares sting you want good information preferably with no risk.