What are your trading views on Penny Stocks?

[Mbrown10012]

I personally don't trade penny stocks, but I want to know what's people's view on them. I know people like penny stocks for various reason whether its the price, volatility and so on. I'm just thinking TA can be pretty dangerous when it comes to penny stocks. Manipulators such as market makers can easily know what most people are thinking. Everyone see's the same chart and they can cause fake breakouts and whipsaw you all day for profits. If the trend do breakout, they still profit as well since they're the one starting the trend and killing the trend.

They also know where is the current support/resistance is at. They know where most have placed their protective stops at. Its not hard for the stock to drop a certain percentage point to wipe you out and re buy at your sold price.

Maybe its better to think like a market maker when playing penny stocks rather that using straight TA.

[Bolimomo]

Note that penny stocks are breeding ground for scams, tools for boiler rooms to prey on the innocent masses.

It's virtually impossible to do technical analysis on them because their prices are typically flat for a long time. The only occassion that a penny stock would be a hit because they have some new development - and many of which are fake and just made up by the crooks in the company so that they can cash in some of their shares.

I had posted my story on trading one penny stock where I could have had made 1/4 million dollars from 10-20k. If you are interested I will find the link.

From my evolution as a trader, I hadn't touched penny stocks for over ten years. Sober and still counting. ;-)

[Mbrown10012]

Sorry, I have no interest in playing penny stocks for various reasons from my post. I'm just asking whats people's view on them and their theory on trading with them



I would love to read your story.

[Hondaboy]

Sorry, I have no interest in playing penny stocks for various reasons from my post. I'm just asking whats people's view on them and their theory on trading with them



I would love to read your story.

Shouldn't this go on the penny stock section but I could be wrong. My view is its not worth the risk and like early post, soo many are scams.

[Bolimomo]

I would love to read your story.
Okay. Reposting below:

My penny stock story: “Quarter of a Million Dollar Dream”

(The following is my true story related to buying penny stocks. You can check on some of the news dated back in 1995/96.)

The stock market is full of scam artists. I had some of those experiences too. Back in 1995 I was cold-called by a broker from Del Mar Financials down in San Diego. He touted me to buy one stock called IDID (Comparator). He said they make machines that do automatic finger print identifications and were coming up with a model to the market soon. The stock price was 1/16 of a dollar. That’s right. About 6 cents a share. I bought in to the story and sent him $5000 to open an account and bought the IDID shares. I also traded in my own account to buy another $5000 worth of IDID stocks. Then, for something like 6 months, nothing happened. I kept asking the broker “what’s happening?” He told me he had nothing to report yet but be patient. Patient? It’s really hard to be patient after half a year. But I did hold on. I kept on checking the IDID stock price everyday. Everyday: ask 1/16, bid 1/32. So if I were to sell out my shares, I would lose 50% of my money. That’s a $5000 total. Not cool! I held my breath.

One day, I observed something weird. The IDID stock price didn’t change. Still 1/16 ask and 1/32 bid. But the volume had jumped to over 4 million shares (typically the stock was trading at less than 50,000 shares a day). I had a total of about 160,000 shares (because this was a penny stock). For four days in a row, the volume was over 5 millions or so a day but the stock price didn’t change. 1/16 and 1/32.

The next day… KABOOM! I checked the price of IDID early in the morning: 3/16 on the bid, 1/4 on the ask. Wow! I called the broker at Del Mar immediately trying to find out what’s going on. He quickly said, “the news broke, IDID is on the move. You have made 3 times your money. I am selling out all your shares!” and he hung up. Afterwards, I thought… wow! He was selling out my shares! I immediately called my other brokerage firm too and sold out the other 80,000 shares. Indeed that was a nice profit. $10,000 profit in each of the two accounts for a total of $10,000 investment. ROI: 200% in 6 months.

Oh… I was so naïve and green. I had no idea what I stepped into. The news broke on IDID on the Internet. People were bidding on this penny stock like crazy. After I sold at 3/16, the stock closed at $0.50 that same day! A 800% gain in a day! Next day, it went to above $1.00. The volume broke Nasdaq’s record (because it was a penny stock). The third day, it went to a high of above $1.50! Can you imagine that????? A Dollar Fifty! I had 160,000 shares! That could have been quarter of a million dollars for me in this one trade! I settled with $20,000. I couldn’t sleep for 2 nights. I could have paid off my house with that money.

But… that’s where the good news ended. Because of the feverish activities on IDID, the SEC immediately halted the trading on this stock: pending on security fraud investigations. Trading came to an abrupt end. Can you imagine those people who bought the stock with their life saving at $1.50 – dreaming that the price would go to $2 or $3 and so on? Trading was halted for months. Later I heard that SEC indicted the CEO of Comparator for stock manipulation charges, as well as Del Mar Financials for pushing the stock. When the halt was lifted, IDID was back to penny status (if anybody would buy it). It was all part of a scam. Del Mar Financials had bought a big block of IDID from the CEO for penny a share or whatever. Del Mar sold to investors like me for 6 cents a share (already made their profit). And the CEO created some hype news and pumped his company up on the Internet. For the 3 days of crazy trading, he unloaded millions and millions of shares to the public. I got lucky. It could have been a total loss of $10000. But then again, it could have been my quarter of a million dollars.; A dark side… and a bright side…

Penny stocks. Never again. This is too much.

[Mbrown10012]

So in other words, you got burned in a good way? the people that bought above your price did not get so lucky.....

[aiki14]

I am almost positive I got the same call as Boli above and didn't go for it, I was doing mostly real estate then and it didn't interest me. I am glad cause I have a feeling I got the call when it was a buck and a half.

I don't trade penny stocks, as Boli said technical analysis is pretty much valueless, and since no analysts cover them you can't even get reasonable fundamental analysis unless you go and visit the company, and they allow you access (highly unlikely).
With the current volatility you can get big moves in companies that can be analyzed technically and fundamentally. You gonna get an 800% return on a listed stock (NYSE,NasDaq, etc) ? probably not, but with the pennies you'll get the 8 bagger every 20 times so your still a net loser.

[Albert0373]

I trade them once in a while for some fun and as a form of gambling.

They're definitely not meant to be seen as investments, only use money you can afford to lose.

Chinaman711, a veteran around, always posted fantastic chinese penny plays and made people around here a lot of money.
But the 'experienced' penny traders (if you can call them that) are saying that pennies aren't what they used to be anymore.

[Bolimomo]

But the 'experienced' penny traders (if you can call them that) are saying that pennies aren't what they used to be anymore.

Inflation?

Maybe financial stocks can pick up where penny stocks left off...

[Albert0373]

Okay. Reposting below:

My penny stock story: “Quarter of a Million Dollar Dream”

...

Similar story to the infamous CSHD, went from $0.10 to $4.00 and was halted by the SEC. $10,000 -> possible $400,000
Thanks for sharing!
Link to story: http://blog.valuewiki.com/2006/12/10/cshd-textbook-pump-and-dump/

[Bolimomo]

Similar story to the infamous CSHD, went from $0.10 to $4.00 and was halted by the SEC. $10,000 -> possible $400,000

What took CSHD 3 months to achieve, IDID took only 3 days.

Most of penny stock plays are just "musical chairs"... see who's left holding the bag at the end...