Finding the Best Penny Stocks Research Sites
One of the main things you need when looking for penny stock research sites is simple common sense. Because the market for most penny stocks is very thin, penny stocks lend themselves well to price manipulations. The way this works is that an investor will buy up a huge block of a penny stock and then plant a rumor that the stock is about to explode in price, and if you want to cash in on the gold rush, then you've got to buy the stock RIGHT NOW. This causes the stock's price to be artificially inflated, as suddenly hundreds or even thousands of people rush to buy the stock. As soon as the price goes up, the investor who planted the rumor sells the huge block he bought for a hefty profit and then sets about to find his next set of victims.Meanwhile, the truth sets in for all the investors who were suckered into buying the stock, and the price falls like a rock, leaving most investors with a substantial loss on their "sure thing" investment.Beware of any advice that requires you to act before you have time to check out the authenticity of the claims being made. Also, read the fine print following any recommendation, and make sure the person making the recommendation did not receive any cash or stock as payment for the recommendation.
- Difficulty:
- Moderately Easy
Instructions
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Read the "Who We Are" and FAQs on each site thoroughly. Know who you are dealing with and what their credentials are.
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Read the fine print on a site, even if you need a magnifying glass. Often, buried in the middle of the fine print will be just one or two lines that admit that the site owner may have been paid (in either cash or stock) to promote a certain stock. Do NOT deal with any site that accepts payments (bribes) for touting a stock.
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Look for balanced reporting. Articles which constantly talk about nothing except how great selected stocks are and how you should buy them RIGHT THIS MINUTE should raise red flags. No matter how great a tipster thinks a stock is, there are always areas of concern and these should be presented to you.
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Paper trade a site's recommendations for at least 4 weeks before committing any of your own money to the purchase of a recommended stock. See for yourself if recommended stocks do indeed go up in value on a consistent basis--and check to see how long they continue trading at higher levels. If recommended stocks tend to spike up for just a few days and then drop back down, it may be that the site is manipulating the price of the stock for their own ends through their bogus recommendations.
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Tips & Warnings
Penny stocks can be very volatile, and because even a tiny movement in the price of a penny stock can represent a huge percentage move, penny stocks are ripe with manipulators and con-men. Take your time and do your own research before committing your own funds to the purchase of any penny stock (see Resources below).
