Sometimes, when I get tired with trading, I think about an easier way. Although I should know better that there is no magic formula for instant success (riches), I can’t help myself browsing the web for ideas. It is always good to keep an open mind and refresh it with different approaches and ideas.

I was thinking about penny stocks again, and why there is such an appeal. With the amount of information and offerings on penny stocks, I have to assume there is a big following. I predominantly trade in blue-chip stocks due to the notion of relative safety (e.g. lower risk than speculative penny stocks). But I do see the appeal of penny stocks realistically doubling (e.g. $2 stock going to $4). I took a look at some recent penny stock picks and true enough a doubling of price is definitely in the cards and the trick is to get in at the right time to catch the momentum run. But the charts also show the typical stock price drop following the momentum doubling action. So, it is very much a trading opportunity with caution not to hold (for the long term). This may explain the never ending chase for yet the next penny stock to catch the pop. This would explain the reason for a continuing stream of recommendations offered for free or for fee.

Okay, that was the non-amusing but serious portion. Now for some amusing material.

I came across a service offering penny stock picks. How does it work? They say they run artificial intelligence software developed over 3 years by a team of 15 day traders costing $3,000,000. They go on to quote their major success story of 13,000% annual return, recommending a $0.07 stock that climbed to $9.60. Their pitch is to just listen to their buy and sell recommendations which they issue about 3 times a month. With horrendous gains like that, you just have to trade $500 to turn it into $65,000.

Let’s say they do have such a system. Why would they not just use the system for themselves? With successes like that, they just have to hit the jackpot once and be done with, unless of course greed propels them to repeat 13,000% profit gains again and again. Perhaps they ran out of capital spending the $3,000,000 to develop the software.

Let’s say they do have a system that can detect penny stock opportunities. Why boast so ridiculously to jeopardize believability? Why boast so high to dampen any chance of managing expectations?

I did not sign up. I will look for something more authentic and real. Their pitch does not lead me to trust them. I favor balance over extreme.

StockTradersPlace (http://stocktradersplace.com) provides a trend following system based on candlestick technical analysis. http://stocktradersplace.blogspot.com provides a “Stock Trading with StockTradersPlace” companion guide. Empower yourself and show that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box. StockTradersPlace provides viewable demo stocks for guest users and a 14-day free trial for sign-up to view all supported stocks.

Copyright © Mar 2009 StockTradersPlace.com



By: David S.Y. Wong

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