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How The Penny Stock Market Works and How To Take Advantage of It

April 18, 2011 by   Filed under Trade Like A Pro

Here at WhisperFromWallStreet.com our mission is to establish a long lasting relationship with you
based on honesty and trust.
We know this approach is unheard of in this market and see need
that has to be met.
We know our success is tied to yours and without truth we both have
little chance of success.
Our mission is to arm you with the facts about the US OTC market,
give you time tested trading strategies, and keep you updated with
trading ideas and profiles of penny stock companies.
We hope you enjoy our brutal honesty and tell your friends and
associates about us.
If this is not what you are looking do not hope that this market or
newsletter will ever become what you are looking for. It won’t.
Save yourself the frustration of trying to fit a long term
investment strategy into a market where it just doesn’t work.
If you are looking to trade stocks for short term profits and have
the risk capital to do it, welcome, we are here to serve you.
The great thing is, once you understand this market, half the
battle is over and you are on your way to building your trading
There is NO other market that we know of that offers so many
opportunities EVERY DAY.
Let’s get to what is important. How does this market work and
what do you need to do to make money in it.
Let’s start with a general question “Why do stocks go up?”
If you ask 100 people this question, most will tell you it has to
do with the quality of the company, technical analysis, fundamental
analysis, earnings or news.
The truth is they would be wrong.
Stocks go up because there is more buying than selling. PERIOD.
Those other answers may be contributing factors to why people buy
stocks but are not the reason stocks go up.
The reason I point this out is because EVERY DAY penny stocks that
are not high quality companies, have horrible charts, no financials
to speak of, and boring news make HUGE runs.
You need to get comfortable with the fact that when it comes to
penny stocks and making a profit, company quality has nothing to do
with it.
This leads us back to the question “what drives penny stocks and
how do I find them” and the answer is ……………
There are over 63,000 public companies around the world all looking
to attract shareholders so getting the word out is necessary to get
the attention of the investing community.
Because penny stock companies do not receive the traditional
coverage of major media or analysts like their big brothers do, if
they want to get their story out or keep investors informed, they
have to pay for it.
There is nothing illegal or unethical about this. Every day  you
see the fortune 500 companies listed on the NYSE or AMEX  pay for
all types of investor and public relations campaigns using ads on
TV, radio,  trade newsletters and journals,  newspapers, and
social media.
These advertisements are also known as investor relations (IR)
campaigns and are designed to generate positive exposure to the
investing community of the company.
When you see a penny stock making a BIG price gain, and it seems to
come out of no where, it didn’t, the move can almost always be
traced back to one of these exposure programs.
This is critical. These advertising campaigns are what drive
investors to penny stocks and are the key to you putting money in
your pocket.
Here is how it works.
The advertising creates exposure. At this point it is a numbers
game.  Because hundreds of thousands up to millions of people see
the story some will like it and buy the stock.
Traders who understand this market will jump in as soon as they see
a new campaign just because they know this is where the fun usually
This usually creates a spike in volume and price.
Now the stock ends up on market scans used by traders who are
looking for what is hot for the day.
Some of these traders will jump in creating even more volume on the
buy side potentially sending the stock even higher. At this point
there is such a buzz going on that that it gets picked up on
message boards and the many chat rooms. As more people see whats
going on they want to get a piece of the action while it is still
hot. This frenzy can last anywhere from hours to weeks depending on
the length of the advertising campaign and how exciting the story
appears. (notice I say appears)
This happens day in and day out in this market. It is where the BIG
money can be made.
If you have any doubt about this do your own research. Go to
pinksheets.com or otcbb.com and check out every press release
issued that day. Then check the volume and price, you will notice
that most of the stocks that issue news will not even budge. They
may come out with the best news ever but because there are SO
many companies there is no way they will get noticed on their own.
Every CEO says to himself “This is the best news ever. Investors
are going to see it and flock to our company and our stock, just
you wait and see” When the market opens and there is no change
in his stock reality sets in and he knows next time if he wants
people to see his story and his great news he has no choice but to
get proactive and pay for the exposure.
If you’re a trader you  should be happy about this. Now you know
exactly what stocks to be watching. Not those that are coming out
with news but those advertising. You will then be right where the
action is that day.
It is these stocks by the way that we specialize in telling you
OK, now that you know the TRUTH about this market here are a few
things to keep in mind and strategies that when used will help you
cut your losses and book more profits.
The number one rule is to remember that the penny stock market is
like the Wild Wild West. There is risk around every corner. Assume
everything you read or hear about EVERY penny stock is a half truth
at best.
Do not fall in love with these companies. Trade them to
make money. If they go up, sell them at a profit. If they go down
sell them quickly for a small loss and get ready for the net one.
Your focus needs to become “do I think this stock is exciting
enough that OTHERS will go out and buy it when they hear or read
about it”.
See, if OTHERS go out and buy it after you, and there is more
buying than selling, the stock price heads higher allowing you to
sell at a profit.
To you, these stocks should just be four letters (the symbol) and a
number (the price). You should not get emotionally attached to
them. Let the other guy fall in love with them. He is the guy who
is going to keep buying it so you can sell it to him at a profit.
Always book your profits early when in a position to do so.
If you found this information, real, truthful, and educational
please  tell someone about us.
Thank you for patience. We are thankful for our readers and will
work hard to serve you.
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