The Five Step Procedure In A Typical Online Penny Stock Trading Fraud

You probably have received an email telling you to invest in shares that cost cheap.  If you had this kind of invitation, don’t buy it.  Unless it’s from a newsletter you subscribed from a penny stock trader, you can never be too sure.  It’s mostly part of an online penny stock trading scam that had been going on in the internet these days.  The internet is a common breeding ground for fraudulent activities.  Penny stock trading scam is not an exemption.

These ambiguous activities can be mostly attributed to the lack of rules and global discrepancies in the internet.  The world of the cyberspace is infested with smart geeks.  It’s almost not possible to know who is trying to pull your leg.  Invitations to an online penny stock trading investment are one of the favorites among fraudsters’ choice hoping to complete a swindle.

That’s the reason why it’s best that you rely on your instinct.  Choosing your online penny stock trading resource is best decided by you.  The most common online scam in penny stocks is the term they call pump and dump.  This is how it works.

1. Stocks are bought.  This is done prior to any engagement with prospects.  Of course, these penny stocks shares are bought at a cheap price.  The motive is to sell the stocks to unwitting investors at a higher price.  And this is planned out well to have it disposed at the right time.  The question is when is that right time?

2. Pumping the shares.  Just like how a real pump works, the shares are being hyped up to entice investors.  To do this, the stocks are priced very low.  The fraudsters compose very attractive recommendation to buy the shares.  These invitations are sent out via emails to thousands.  Websites that look credible and professional are being launched.  Of course there is already a profit margin set in the selling price.

3. There is room for manipulation.  Online penny stock trading are shares sold by small companies.  These companies are usually listed in a system called pink sheets.  There is no information as to any profile of these business entities.  The lack of this information now becomes an opportunity for fraud to manipulate the prices and the company’s background.  Thus the hype.

4. Investors buy the shares.  From the end of the online swindlers, there is no assurance as to who will take the bait.  But assuming out of the thousands of people receiving the email, there are about 10% who decided to invest.  How did this happen?  How can anyone be convinced by a total strange and entrust his or her fund to a share?

5. Dump the stocks.  When shares are bought, the fraudsters leave and don’t make contact with the investors again.  This is now very rampant in online penny stock trading.  Be careful not to fall into this scheme.

Your best defense in avoiding these online penny stock trading scams is to know more about the company they are pitching in.  These entities can be very well legitimate and may actually be selling real penny stocks.  But because there is the lack of information, it becomes so much easier to pump the facts and dump them when they get what they want.  So it’s always good to take some time to do your own research.  And be patient with your investments too.