Penny Stock Picks: The Promises and Pitfalls
Keith Guyette M.Ed, J.D.

Defined Tag: Penny Stocks.

When trading any security you really need to do your homework. If you do not, and the price per share drops, you have no one to blame but yourself. Stock picking sites and bulletin boards often allow a trader the benefit of finding many emerging companies. These are great places to start but you must always do your own "due diligence".

There are many different types and styles of pick sites. Most are not very good, a little shady, or sometimes even completely illegal. Just recently I saw a site pick a stock on one day, but post that it picked the stock 2 days earlier. These types of practices are "shady" to say the least. The SEC investigates these companies as "pump and dump" scams and has many convictions.

Stock picking sites you should avoid using are ones that use false advertising and misleading statements. These sites will often state unrealistic gains, "this stock will go up 10,000 percent" or "this is the greatest company ever". As I said earlier, some sites will even tout a false history. Saying that their picks go up a certain% when they never picked these stocks or changed the dates on their picks. In reality no one knows how a stock will do, through solid charting and research you can put the odds in your favor.

Also watch out for these trigger words "guaranteed", for a "limited time" we have "insider information". If you feel pressured to invest, it's probably not a good thing. Sometimes you will want to get in at the bottom, or the support level of a stock, especially of a penny stock. If you feel pressured to buy though you should probably think twice. If you think you're a victim of internet stock fraud or a pump and dump scheme report them to the SEC at enforcement@sec.gov.

This type of "pump" follows into bulletin boards and chat rooms everywhere. Sometimes these are just novice traders attempting to make their stocks rise, at other times they are paid representatives of the company making misleading statements in order to keep the price per share higher while the company dilutes.

Keith Guyette M.Ed, J.D. is a professional trader and the owner of a stock talk board http:www.thepennystockblog.com as well as the head stock analyst for http:www.bottompicks.com.