The buyer of penny stocks can find a lot of info about a company from analysts and others who study the stock and the business it is in as well as the market that it serves, and then they render a buy sell recommendation. These recommendations are often made by the “pump and dump” people who hype a stock to achieve a run-up in the price. Once the price reaches a certain level the stock is dumped and the price declines quickly, and usually before the unknowing investor is aware.
The way to make money on penny stocks is the same way money is made on stocks listed on the NYSE. Research the company and the business the company is in. Do the homework needed to assess whether the stock has a future that will be worth money. Penny stocks should have a great amount of trading volume. The higher the volume of shares the easier it will be to trade them and the price mobility of the stock will be easier to track. The number of shareholders should be enough to make a thriving market for the stock rather than a lower number which could possibly create price control and manipulation.
Buying and selling penny stocks is an excellent introduction to stock trading on the NYSE without the heavy risk. The buyer of penny stocks will risk a small amount of capital for a valuable learning experience, but the amount can be insignificant compared to a NYSE stock purchase. It is also a learn as you go process, which means that losing a little over a period of time allows the investor to recoup their loss and learn in the process.
