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What are the Pitfalls of Trading Penny Stocks?

You will get to hear all about all sorts of risks that are taken while playing the stock market game. There are high-risk stocks and investments along with many low risk mutual funds and everything between. When it comes to high-risk investment options, penny stocks often top the charts as some of the highest risks you'll find in investment circles. Of course, they also offer some of the highest yield of another stocks as well as the costs start so low and the sky is literally the limit. Do not get stars in your eyes however when thinking about penny stocks as investments because there are plenty that have gone before you into that kind of investment and comparatively few that have come back from the brink as wealthy women and men.

Naturally reason is rarely a good bedfellow for ambition or dreams and the low prices of most penny stocks it’s fantasically sufficient for even the common man to have 1 or 2 dreams of his own when referring to obtaining wealth by playing the stock market game and there's a much bigger thrill with penny stocks than you will find in any casino with penny slots.

Some of the common risks associated with penny stocks may not be risks one would commonly presume are related to the stock market. The thing you want to recollect is that trading penny stocks isn’t regulated in the way that the major stock exchanges are regulated. This suggests that a big security net that others in the stock market are protected, to some degree, by does not extend into the hazy waters of penny stock trading. It's the forgotten kid of oversight and speculators are left to fend for themselves.

The 1st risk is crime and this risk seems to be rampant in the penny stock market. You'll find all kinds of fake penny stocks that are heavily sold by overseas corporations that look glossy and legitimate online, in investment magazines, and thru many brochures, and even 1 or 2 punctiliously crafted and well crafted PR releases, newsletters, and e-mails. The problem is that there is no product or the demand is deceptively overrated and the stocks are largely junk stocks worth nothing, if they exist in any way. The “businesses” in question take the money, dump, and run never to be heard from again. Unfortunately this is reasonably common and many of the “companies” that perpetrate the crimes are found overseas. This is the largest risk though actually not the only risk

The other risk is that the companies that are listing penny stocks are often smaller firms that are building or larger businesses that have fallen off the major exchanges radar for one reason or another and are either going through desperate restructuring or failing all together. Both pose very real risks but if you choose to put your faith in the right new business or old business that is getting its act together the correct way you'll find fantastic profits on the other end of the rollercoaster ride.

The other risks that are concerned when trading penny stocks are the absence of fiscal reporting. Firms and companies that trade in the major stock exchanges are required to release their finance information and account to their stockholders. The same does not are true for penny stocks. There's no liability and little public info. This suggests you've got to really dig to find out credible info regarding the firms you are considering and are left going with your tummy very often instead of counting on legitimate info that will be favorable in your investment decisions.

Penny stocks are very profitable to people who come up with a way to pull off the investments and come out smiling. There are just a few instances in which there is little profit with the main part of these investments yielding serious profits for stockholders.

Steve Robust reports on the latest stock market trading tools and newsletters, writing on subjects such as penny stock trading systems and popular guides like this Penny Stock Egghead by Nathan Gold review.

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