May 28, 2012

Posted by in Penny Stock | 0 Comments

Sub Penny Stocks: Shallow Waters Bring Treasure And Danger

A quick look around the online trading world will bring hundreds of warnings about sub penny stocks. Of course, for every person yelling, “run away,” you can usually find another person who says, “Come on in, the water is fine.” The trick for beginning and experienced traders alike is navigating the dangerous waters of sub penny stocks to find the treasures without being swallowed by the sharks.

Coin Toss: Sub Penny Stocks on the Market

Most experts will agree that sub penny stocks are more often than not a coin toss. Since the companies on the lower end of these markets usually have little in the way of established public histories, vigorous research skills will do no good. Because the companies do not qualify for the more stringent AMEX, NYSE or NASDAQ markets, reporting requirements are minimal, so you will be hard pressed to find useful stats for trending. Instead, you have to rely on a combination of investment savvy, business experience and luck.

Warning Signs: Troubled Waters for Sub Penny Stocks

There are some signs that can indicate a poor investment. Rising chatter on online messaging boards for or against certain stocks can mean unethical money managers are trying to manipulate stock prices. When stocks cost pennies or fractions of pennies, a tiny change in price can deliver a large percentage gain. This, along with lower regulatory presence, makes the market a prime target for fraud. You should also avoid rapidly declining stock that has not stabilized. For example, if a $10 stock has hit sub penny levels in the course of a few months and it keeps going down, something is very wrong with that ship. However, if a stock drops to a few cents due to obvious reasons and stabilizes for months, the company may be poised for a comeback.

When share prices are so low, you can lose your entire investment within a few hours. At the same time, these markets provide an opportunity to make equal gains short term. The keys to investing in sub penny stocks are luck and a close eye on the performance of the stock.

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