One of the things that everyone should realize is that the markets are manipulated. You have to understand that and watch for the telltale signs to avoid getting burned. Penny stocks are manipulated ten times as badly as other stocks. Maybe more. The classical example is the pump and dump where people advertise like crazy and start driving the stock price up. Then the amateurs pile in and drive it up more. The pros then dump hard, and the price plummets. The individual investor gets screwed. Think Wolf of Wall Street.

The solution is to either stay away from penny stocks or else just trade them with the pump, and get out before the dump. Otherwise you're screwed. Penny stocks have no place in an investing portfolio.

John

P.S. It occurred to me that some of you might need an example of market manipulation. Start with all of the pinning of stocks on option expiration day. There's no accident there. But as a specific example, after AAPL earnings in May, there was the initial spike, and then the stock was flat until May 16. Then it took off on May 19. Why that day? hmmm. Because the "powers that be" wanted to keep AAPL below 600 until after May monthly options expired. Then it was free to go up. If it had gone up earlier, all those with May 600 short calls would have lost money.