Chapter 6: More Terms To Know About Penny Stocks - Understanding Manipulation
Remember that we have talked about the fact that all brokers in penny stocks are not holding your hand through the process? Some will dabble with what is called penny stock manipulation. And, it is just what it sounds like it is.
Manipulation happens when there is a bad broker in the mix. Heres a basic mix of what happens in this case.
There is only a few or even just one market maker involved. The market maker purchases a large amount of penny stocks for just about nothing.
He then creates a market of his own by stirring up sales. He will literally encourage others to purchase the stocks based on either fabrications or simply exaggerations of what the stock will actually do. Most of the time, these things are unfounded.
He sells all of his penny stock sales to those investors that have fallen for his sales hype leaving him with a nice penny to call his own of course.
Since there is so much buying of the stock, the price and demand for the stock rises. This allows for the stock to do very well, very quickly, turning a profit.
Yet, when the stock does not have any additional buyers, which is likely to happen quickly, the stock will bottom out or simply fall through leaving everyone with a stock that has nothing to it.
In some cases, the market maker will then purchase up the stocks and do the same process over to other penny stock investors. The end result is that those that are holding the penny stocks can sell them back with no likely possibility of breaking even or they have nothing left.
This can be quite frustrating to the stock holder and without even knowing it they have been taken for a ride.
In other words, most stocks can tell a history just in what they can provide for you by what they have done in the past.
Penny Stock Listings
Chapter 8: The Broker Search - Tips to The Right Broker 1.
For example, a penny stock is a common term used to describe a stock that is inexpensive to purchase per share. Make sure you know about the broker, his experience as well as his success rate. They will not allow those companies that are found to be fraudulent or those that are not legitimate in some other manner will not be provided with registration and therefore can not be sold as penny stocks.
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