Most people are afraid of the stock market, so they skip investing in everything related to it. Which is a big shame, especially since penny stock markets are a good investment opportunity. The fear comes from the fact we don't know the basics of stock markets. So we stay away from what we don't know, because there is one universally-known fact: investing in stock markets is risky.
The risk is indeed high, but if you know the basics you can try your hand in the penny stock market.
What is a penny stock market
The penny stock market is the same as a regular stock market, but the companies which operate on it are small. This means the share prices are below $5, many of them costing a penny, thus the name. The total value of the penny stock market is between $50 million and $300 million.
The low cost of the shares doesn't mean you should go out and by as many as possible. The shares have the same risk, if not a higher one.
The high tide
On the penny stock market there are many experienced investors who practice what is called the “pump and dump” trick. This means they buy many shares from a company, to raise their value, then, when people become interested in them and start buying, the investor sells everything. This causes the price of the shares to increase artificially, then decrease rapidly, leaving the unsuspecting buyers with a budget hole.
Little or no information
Most companies on the penny stock market provide little information for potential investors, which is why most experienced traders avoid them. The lack of information is often dubbed by misleading information. The companies get away with this behavior because the market is more flexible and relaxed, compared to traditional stock market. Due to the relaxed rules of penny stock market many scammers get away with their tricks.
Before you invest in a company on the penny stock market, do your research and try to find as much as possible about the company.
When you decide to invest on the penny stock market, be prepared to lose everything you've put in. If you are careful and don't give up after the first failed attempt, you can learn the tips and tricks of the penny stock market and start gathering some pennies.
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