Penny stocks. We have all heard of them. But very few of us know exactly what they are or where to buy them. The very thought of them conjures up different images for different people. For some its huge wealth and for others its huge risk. For me, its huge spreads. i.e. the costs of trading them are normally so high that it’s just not worth bothering.
Take a look at this article from CNN. Apparently, Tim Grittani turned $1500 into $1 million in just three years (following the strategy of a trader named Tim Sykes) and there’s even a photo of him to prove it. But wait, just one photo? Are we to believe this unbelievable rags to riches story with the evidence of nothing but a picture?
No other verification has been given for this tall story, no brokerage statements no bank statements, nothing. Yet this article has managed to garner 3000 total shares, 1733 comments and it is one of the first hits on Google for the search term ‘Penny Stocks’. God knows how many page hits (and advertising revenue) that is a month…
The photo itself is courtesy of Millionaire Media LLC, which appears to be Sykes’s company, but isn’t it a strange company name for a man who actually is such a successful stock millionaire? Seems rather ‘salesy’ to me.
Is this how to buy penny stocks?
But what is even more irritating is that the article gives absolutely no clue at all as to how to buy penny stocks and how to make money from them. According to the article, Grittani learnt his tactics off the internet from Sykes and succeeded because he put in god knows how many hours every day into learning how to trade.
I’m sorry but isn’t that always the way? That someone got somewhere because they worked hard, harder than anyone else, and because of that we don’t need to explain any more about it or explain how to buy penny stocks? It’s convenient.
The truth is that penny stocks are a losing game most of the time. The spreads are so wide you’re better off going to the casino and playing craps. Unless, of course, you have inside knowledge or an edge that sets you apart. But this article doesn’t tell you any of that, it tells you nothing about how, where or when to buy penny stocks and gives not a shred of information about either of the traders away (a quick search also reveals little apart from some dated looking blogs that looks more like placeholders than anything else); Even if it is true, the success could quite as easily have been down to luck alone. How are we to know based on this factless piece of journalism?
It’s for these reasons that this article should be dismissed, it tells us nothing of use, all it does is generate page views, because, you know, we all love to hear a get rich quick tale that works.
Timothy Sykes could just as easily be Jordan Belfort (wolf of Wall Street), just how are we to know?
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Joe Marwood is an independent trader and the founder of Decoding Markets. He worked as a professional futures trader and has a passion for investing and building mechanical trading strategies. If you are interested in more quantitative trading strategies, investing ideas and tutorials make sure to check out our program Marwood Research.
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