Why do most people lose in Penny Stocks?
I looked into a few penny stocks and i see that the ask and bid prices are huge differences. I look at the current price for example for one stock it was 0.04, the ASK was like 0.065 and the bid was like 0.03. Then i looked at it’s charts and i saw that particular stock doesn’t even reach the 0.06 price so it’s like the people who gamble with that stock may never win. Is this why penny stocks are so dangerous?Those stocks are swinging in the 0.008ish price. Is that why penny stocks are really gamble stocks?
Penny stocks are the riskiest and most volatile class of stock because these companies are often in the developmental stage. That is, they have a business concept but have not yet begun to generate reveunues. Typical examples are in the precious metals, oil, and natural gas sectors. Often, a startup company will acquire or lease land for the mineral rights in areas that have previously generated some successful mineral extraction. The start-up has no income statement or balance sheet, and it’s future prospects are dependent on (1) doing geological surveys that confirm that the commodity they are seeking is present, (2) the commodity can be extracted at an economical cost, and (3) the startup company can attract the financing to transition from a development-stage company to an operating company. There is an added risk in the penny stock segment, and that is blatant manipulation. There are scores of penny stock newletters that are constantly touting various penny stock selections with wild claims of up to 8,000% profit potential. Since greed is a common trait to all traders, if enough people take the bait, the penny stock can rise dramatically for a short period of time. The manipulators then get out of the stock at a profit, reality sets back in, and the penny stock drops back down to pervious lows, leaving those who speculated with losses. More often than not this is the case. This segment of the market is truly for gamblers. It’s fun to play around with if you are using “Mad Money” that you can afford to take a 100% loss on and not care.
Tips for current penny stocks scams