Penny stocks are the most dangerous investments due to different scams and frauds associated with them. These have attained the bad status mainly due to pump and dump schemes linked up with the stocks.
Pump and dump is an unethical activity in which scammers purchase majority of shares of probably the self-created companies and then make full promotions to attract people for buying them. The share price goes up within a few days and as the stocks gain prices, the fraudsters sell off the shares, which cause collapse of share price. It leaves the stock worthless and unrecoverable. This pump and dump scheme is commonly followed in pink sheets or OTC stocks. The innocent investors get exploited by the fraudulent activity and unethical approach. Click here to know more about penny stock need consideration.
Penny stock trading has attained a bad name due to such occurrences. There are many fraud companies ready to make scams for these stocks. You can identify such fraudulent companies by analyzing about them beforehand. Less information and quick decisions might not be good for penny stock investors. You can exactly follow the risk strategies to gather all information about the particular companies and make right and informed decision about investing in them. You can attain success by taking the money off from the victims of scam.
Penny stocks are not alike. There are a few companies floating the REAL stocks to gather money for a right usage. There are many low priced stocks (below $5), which have been floated on OTCBB or pink sheets and trade on security exchanges. Penny stocks include the stocks of some private companies having no active trading market. You can’t try your luck by going after the advertisements floated by promoters as there are many forum posts, blogs, FB posts and other marketing strategies followed by frauds to implement pump and dump scam.