Penny stocks question... is it just too risky?

Question

I see some stocks such as HTOG and IWWI, and they look, though really risky, like one could profit tremendously on them. I mean in two days you could double your money if you invested at the right times. I am wondering if anybody has advice about this:

1) where I can find some good, reputable stuff to research about these and other companies,

2) if you might buy these stocks, and

3) if you think there are any penny stocks out there that aren't humongously risky and aren't boiler room/pump and dump scams, and how to tell if a certain penny stock is indeed legit!

I would really appreciate any advice.

Answer 1

My advice to you is to conduct a thorough research yourself. The questions to be answered are:

- Is this a company that has $1m revenue with 100m shares outstanding?

- Is this a company that is in financial trouble and it may have to issue additional 20m shares to survive another 6 months?

- How liquid is its stock?  

At the minimum, you should take a look at the company's Web site and read its financial statements.

Answer 2

The key to making money in penny stocks is understanding that 60% of the trades may lose you money. The key is "money management" and "position sizing".

No experianced trader shots for a big "winner'  on penny stocks.  They'll have 10-20 stocks with entries well planned and an exit stradegy before they take the position.

Web sites that promise great "picks" completly ignore the most complex (and important) part of trading.............

The #1 mistake of new traders is picking one or two penny stocks and hoping they'll triple in no time. That's a recipe for financial disaster.

Answer 3

When you invest/trade in penny stock you should never put up more than you can afford to loose and you should assume you will loose it all. Unlike regular securities, penny stocks usually do not let you use risk cutting procedures (options and/or stop orders) since most are not traded in a regulated market place.

They say when you buy securities you have a 50%-50% chance of making money, when you buy penny stocks you have a 50-50-90% chance, 50-50 chance of making money and a 90% chance of loosing money.

When buying penny stocks, like any other security investment, you never invest 100% of you investing capital. Penny stocks are fun to trade, but you should never count on them to be considered part of your primary investment objectives.

Here are some reputuanle websites that you may find interesting

http://www.smallcapinvestor.com/

http://www.stockwire.com/

http://alphaking.com/

http://www.otcstockexchange.com/

http://www.mcapstocks.com/Default.asp

http://www.pinksheets.com/pink/quote/ind...

http://ragingbull.quote.com/cgi-bin/stat...

http://www.swingtrades.com/

Most penny stocks are legit, it's those that tout them or try to trade them that brings questions about their legitmacy.

Most experience traders won't usually trade them, but it's fun every once in awhile to take a shot but not a routing habit,

Answer 4

Well you already acknowledged that you know they are risky so you dont need everyone to tell you that. The best way is to call the company directly and look at the companies website. Do your own analysis which will be as good as anything you read about online since penny stocks are not covered by institutional analysts.

Answer 5

"in two days you could double your money if you invested at the right times"

this is NOT investing!!!!!

rather, this is volunteering to throw your money down the drain.

it may take 2 days to double your money, but these things are so illiquid that after 2 days, you may not be able to cash out!  you might very well have to wait another day, and by then, you could have lost everything.

heck, the ask/bid spread alone should be enough to scare you away from things like this!

CASE IN POINT:

IWWI.PK (one that you talked about yourself!):

closed trading today at $0.01/share

down $0.08 today - or 89.89%

volume: 153,550 shares (so a total of 1,535.50 in trading volume)

this is the first actual penny stock that I've ever seen.

it actually costs a penny!

Do you even realize that the 60% American is worth more than this company?!

Answer 6

penny stocks are often far too risky and don't usually go anywhere

Answer 7

Large institutional investors, including mutual funds, don't put money to work in penny stocks.   The forces that move stock prices is not you , me or the man behind the tree.  It is the big money.  A stock usually carries the price it deserves.  Maybe, you see a car for sale for $100 on the lot.  Sounds good.  You look under the hood and there is no motor and the steering wheel is missing. That is kind of what a penny stock really is.

Answer 8

Did you read the allpennystocks.com disclaimer?

A couple of key points:  they admit that they "may be" long some of the stocks, and that some companies pay them for coverage, and they deny investigating any of the stocks mentioned.

Isn't that enough to scare you away?

Answer 9

In my own humble opinion - as there are lots of opinions....

I wouldn't recommend investing "investing" money in penny stocks, they're very risky - even though they can pay off enormously, many of them disappear entirely.

I would avoid investing from a big listing of penny stocks or by any unsolicited promotion of a particular stock. (Just the way I do things.) I will invest in "penny stocks" if I believe that the company -not the stock- has good long term growth potential or something particular going for it. (Which will rule out most stock screening programs, etc.)

I currently hold three "penny" stocks. one trades in Toronto, is a copper miner that has has what I think is great growth potential. I'm holding it still only because I attended the stockholder meeting, and listened in on enough conversations that I still believe the company has excellent prospects. (COP.TO -yahoo finance)

The other is a company that I know very little about except that it is pursuing an alternative energy strategy that I think will actually work. (They can take waste water on land that is worth virtually nothing and turn it into diesel fuel. GSPI.PK - yahoo finance.)

The third is Northern Oil and Gas, which is rapidly departing the penny stock arena. They're leasing land in the Bakken Oil formation, and I believe their long term potential is pretty good. I'd wait for it to come down more before adding to this one, (china is beginning to remove their fuel subsidies - when they're done doing that and oil stocks have taken it on the chin, I'll buy more.)

I acknowledge that they are both long shots. (I regard any penny stock as a long shot.) I know there's a good chance either one will go to zero, but it's possible that either one will go to the moon. I'm prepared to lose every dime I have in there.

The other issue with penny stocks is that they're thinly traded. If you buy any quantity you will change the price. If you make a market order you may pay much more for the stock or sell for much less than intended. You might not even be able to make the transaction -- I've seen an order at the ASK price sit for hours before the transaction was complete. So it will be difficult to jump in, collect 50% and jump out.

Neither of your ticker symbols showed anything on yahoo finance, so I would be extremely hesitant to buy either one. (it should at least show up.)

So, find a good company, or one with a great idea, place a small bet, and plan to stick with it until the bitter end, or until you're rich. (at least, that's how I play the penny stocks.)

Good luck.

Answer 10

stay away from penny stocks.

"in two days, you can double your money"

well, you can also lose all your money.