Should You Be Trading Penny Stocks?
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Intro: 0:00
Pros of Penny Stocks: 0:22
Cons of Penny Stocks: 2:28
BIOC Pump and Dump example: 2:50
TNXP Pump and Dump example: 7:31
Summary: 9:41
Should you be trading Penny Stocks?
In this video, I'll show you the pros and cons of Penny Stocks so that you can decide whether Penny Stocks are for you. Can you make money with Penny Stocks? Is it worth your time?
It's very easy to find the pros of Penny Stocks because everyone is telling them to you:
- You can start with as little as $1,000, with stocks trading between $0.10-$1.00.
- It can only go up
- You can "easily" make 100x
- Small moves could equal big gains
What are the cons of trading Penny Stocks?
-Often a Pump and Dump Scheme
According to Robintrack, a website that tracks how many Robinhood users have a stock in their portfolio, and one of the Penny Stocks that Robinhood users like to trade is BIOC. Around 70,000 Robinhood users own it.
Earlier this year, the stock was trading at $0.32, then suddenly jumps up to $0.80. Well here's what happens, and why it's called a "Pump and Dump" scheme.
People were saying "you have to buy this" and BIOC even tweeted something, and this is when some people jumped on it, but most people didn't put BIOC into their portfolio until the initial jump was over.
These Penny Stocks are not traded at a regular exchange. They are traded OTC "over the counter." Often these companies will pay people to send e-mails to thousands, and thousands of people promoting the stock. This is when insiders buy the stock, before the hype. Then when the e-mails "pump" up the stock" they "dump" it after the price goes up.
Often time, when you look at these companies' earnings, they fail to make a profit year after year, and quarter after quarter.
TNXP is another stock that is very popular among Robinhood users. If you look at their charts, you see a very similar thing happening where you can see on the chart how the pump and dump work. You can see spikes on the chart where insiders are buying it before they hype it up with e-mails and fake news, and then you can see where these insiders dump the stock after it has been hyped up.
You see these spikes on their chart over and over again.
In Summary:
- You are gambling.
- People who buy Penny Stocks use the "spray and pray" approach. They buy Penny Stock from many companies hoping one of them work out.
- Most Penny Stocks are junk.
- If you want to trade with a small account, trade options.
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Should You Be Trading Penny Stocks?
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