Is penny stock a scam? learn how to trade penny stocks

The answer to this question is yes and no. There are thousands of penny stocks out there and many of them are not even required to file financial statements with the SEC like pink sheet stocks. This opens the doors for stock manipulator, promoters, scammers and the owners of these companies to mislead the public, especially the novice traders.

Although this is the case, this doesn't mean we can't make money trading these stocks. This requires of course some specific strategies that utilize price momentum, heavy volumes, rumors and news to capitalize on fast moves that develop as a result. In essence, you are trading because the stock is a good solid company, but you are trading because you want to take advantage of other less experienced traders that think the company is solid. There are thousands of investors who still trust these companies and there promoters and are willing to risk their capitals by buy long term positions in these stocks. A scam or not, momentum traders don't care. All they care about is to buy and sell fast for a small fast profit.

On the other hand, there are legitimate companies out there with solid fundamentals and management that become huge in a few years time. To find such companies requires good knowledge on what to look for, good timing, some common sense, management of risk and some luck. These are not scam companies but they are priced so low because they have to start small first and do the hard work later.

If you want to understand how to trade penny stocks, scams and non scams with dozens of unrevealed-before strategies and trading setups, check out my penny stocks trading books here.