Prof. Tyler yamazaki

Chapter 3
The Gist of Penny Stocks
There are two things that trading Penny Stocks are very much known for:
1. You can quickly make a big amount of money.
2. There is a high probability that you will lose a lot of money.
These are two opposing extremes that you will be facing. Of course, your
objective is to rake in serious profits. Unfortunately, the majority of the
people who trade Penny Stocks fail to make any positive return at all. But
do not be discouraged because there are still people out there, the well-
experienced and real expert traders who doubled, tripled, and continuously
growing their money more than you can ever imagine.
Losing a trade is normal. Even well-experienced traders make the wrong
investment decisions from time to time. However, you must avoid such
mistakes as much as possible. Now, in order to help cut down your potential
losses, you should be aware of the risks that you will be facing when you
trade Penny Stocks.
The Risks
Small Companies
Majority of the companies in the Penny Stock market are small companies.
In fact, they can be so small that they do not even meet the minimum
capitalization requirement. You will find many of these companies on the
Pink Sheets. Since they are small companies, it is hard to tell if they are
stable enough and if they will even grow. Many small companies also tend
to be less professional.
Start-Up Companies

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Many of the companies that issue Penny Stocks are start-up companies.
Therefore, they tend to have a very limited history that you can track. This
makes it risky because you would not know for sure if the business is
legitimate or if the company is operating a scam.
Less Transparent
Penny Stocks do not have stringent requirements. Remember that the
companies on the Pink Sheets are not required to file with the SEC to meet
the minimum capitalization requirements.
Many companies on the Pink Sheets only reveal very limited information
about their business, so it is hard to get sufficient and accurate data. Worse,
some companies operate a scam.