Penny stocks are the most volatile and dangerous stocks that you can
invest in. Many of these companies are micro-caps and are extremely
dangerous to investors.
These stocks are often attractive to novice investors as they feel they
can purchase a large amount of shares for a small price. I cannot stress
to you enough the dangerous nature of these stocks.
If you want to play penny stocks you might as well head to your nearest
casino and play roulette or craps. Another problem with trading these
penny stocks is that the market is very thin. Which means that the
stocks are not highly liquid. The bid and ask prices can vary greatly in
these stocks because of the thin amount of trading.
My best advice is to stay away from these stocks. If you receive unsolicited e-mails touting these penny stocks, run, don't walk!
Many of these stocks are ripe for pump and dump schemes. These involve
early investors buying lots of shares, pumping up those shares through
marketing campaigns and then dumping those shares. Leaving late
investors holding the bag.