You are probably trying to make money in penny stocks. But in order to do so you will need to be aware that penny stock prices can be manipulated. You don’t want to trade or invest in a stock that is being manipulated so what are some of the ways in which someone can manipulate penny stocks.

The biggest opportunity for manipulation of penny stock prices is under the guise of penny stock recommendations. This most often comes in the form of newsletters or stock picking services. I am not saying that every penny stock newsletter or stock picking service is corrupt but some of them are and you will need to be aware of that.

Some newsletters will engage in what is called a pump and dump scam. In such an instance the owner of the newsletter will quietly begin accumulating shares of a particular penny stock. Most of these penny stocks will have a low float and a low number of shares traded on a daily basis. After they have accumulated the shares that they want they will then issue a buy alert to their subscribers. The readers of the newsletter will then pour into the stock as fast as they can. As a result of the low float and traded shares the penny stock will soar in price. At this point the owner of the newsletter will sell his shares make a nice profit and move on to his next conquest. His subscribers are left holding the bag and left wondering why then can never seem to make money in penny stocks.

As an aside you may want to research a newsletters past picks to see how those picks have fared. Does the stock seem to get a one or two day spike and then fall back to it previous trading levels? If so, then you will want to avoid these newsletters. Look for newsletter who made stock picks that showed a steady improvement over time after the pick was released.

Another potential area for manipulation of penny stock prices is on penny stock message boards. These message boards are sort of like the Wild, Wild West. Insults are thrown back and forth between posters. There are two sets of players on every message board: those who are long the company and those who are short the company. Each side is trying to sway investors on the message board to consider their side. Occasionally, you will have individuals post false information on the message boards to influence other traders. Often this is all it takes to make a profit for penny stocks that trade few shares each day. Some posters will claim to have inside information when nothing could be further from the truth. Do not use message boards as your sole reason for either establishing a position in a penny stock or for liquidating a position that you had researched out previously. I pretty much avoid penny stock message boards today because trading is a mental game and I don’t want to second guess myself due to false information.

The third way that penny stock prices can be manipulated is through penny stock “research” firms. Very few companies actually do research on penny stock firms. It is not worth their time. Most of the companies that do this research are paid by the company itself to issue a research report with a buy recommendation. This is not real research and for all intents and purposes is nothing more than a twist on price manipulation. The influx of investors into the company give the company an increase in share price or simply increased trading volume.

As you trade in penny stocks you will be much more successful if you watch out for these various types of penny stock price manipulation.