A huge mistake novice penny stock traders make, is they don’t know how to trade a promoted stock. This can be the difference between making thousands of dollars or losing your clothes. All expert penny stock traders know how the promotion game works. Most penny stock are promoted at least once a year, so that the company can raise capital by diluting shares. Their movements are quite different from the others making them very hard to read. As a matter of fact, those who are unprepared for the changes in the movement of these stocks can suffer some losses. So it is essential that you remember this and understand what a promoted penny stock is all about.

Trading The Promotions

A promoted penny stock is just like any micro cap stock or penny stock. But it has been listed as a pick by popular newsletters. This means that this stock has had some promotion, making it more popular and in higher demand. Because of this, the share values will increase. This could be a positive thing, but there are also some risks that come along with buy these penny stocks.

Penny Stock Promo Strategies

The movements of promoted penny stocks are often caused by unnatural sources. Because of this, there is a high risk of a sudden collapse in the share price as well. This usually happens when the stock that is being promoted is listed through some exaggerated promotions or by giving out wrong information in order to inflate the value of the share. Sometimes, the stock is promoted by a third party who has shares of that stock. The third party may be looking to sell after the market has already been inflated in order to profit themselves.

The trading of promoted stocks can be a very profitable business. In fact many people have made their millions with these penny stocks. But one must always remember to be careful. There are instances when one might be late to the rally of the promoted penny stock. If you still want to play, make sure you are in a short position if you have an overseas brokerage account. The stock price is most likely to fall after a rally happens as most traders will just give up on the stock after promotion is finished. I you have done your homework on the stock and it looks good, then you can consider a long position too. Make sure that you look up information on the stock through a third party before investing in it. Penny stock promoters typically try to promote the stock in three waves, with wave number one and two often failing.