When trading penny stocks you begin to dig for information immediately you find penny stock forums once in the forum you will notice heavily talked about penny stocks. Immediately this should set off warning signals and you should become wary about the stock.
This is not to say the stock is no good but there are reasons its being discussed and often these discussions are the result of people who own shares of the company talking it up to raise the price per share so they can sell. Or, people who have been paid to promote the stock doing a good job at promoting by keeping the symbol in the top of the forums and noticeable to every trader that visits the forum.
This is what us penny stock traders call “hype”. At times “hype” can actually get the stock rolling and everyone in low will profit. This is a good thing but doesn’t necessarily make the stock good. There are better ways to research stocks.
Penny stock promoters prey on new and young traders. They are looking to capitalize on the get rich quick mentality of the penny stock trading crowd. They will pump their stock up no matter whats going on telling everyone that is the next microsoft and then when the stock does poorly they will blame the naked shorters. Naked shorters are traders who short penny stocks without owning any shares. When they short a penny stock, they’re betting that the price will drop and with penny stocks they’re usually right. Because the general population can’t short penny stocks they feel these naked shorters are insiders manipulating their stock so they can buy at a cheaper price Its the fault of these shorts that their great money making stock is not going up in price. This is about as real as the boogeyman.
Buy stocks for the right reasons, not because it has more people excited on some random message board than any other stock.
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