As is often the case with penny stocks investing, people seldom take the appropriate amount of time to do the proper research needed to make an informed decision before purchasing stocks in this highly speculative market.
Investors new to the online investment world are the most susceptible to leaping into the up and down world of penny stocks without first acquiring the proper knowledge needed to be successful in this form of investing.
Only when the amount of losing trades have depleted funds available in their brokerage account will they realize that knowledge is the key to success.
Although knowledge is the key, it by no means guarantees success in that every investment or trade will be a winner.
Preservation of capital is the number one rule across all forms of trading and investing, including the larger equity markets such as the NYSE and NASDAQ, as well as the futures and Forex markets.
Penny stocks are no different.
An investor or trader that knows when to exit a trade and accept their losses before they are in too deep, will often go on to be successful and profitable.
Companies that trade on the OTCBB and Pink Sheet stock exchanges require a great deal more due diligence than their larger cousins that reside on the NYSE and NASDAQ.
Since the companies that trade on the OTCBB and Pink Sheet stock exchanges are usually brand new companies just getting started or private companies that have recently become publicly traded entities, there is not a great deal of information available.
Although the OTCBB does require quarterly filings to the Securities and Exchange Commission, penny stock companies are not as transparent as their larger cousins, which forces investors to work harder to locate relevant information.