Why do people avoid penny stocks?

[Leena Nathan]

We should avoid penny stocks because of less volume, and it is thinly traded and easily manipulated.

[shivkant]

because trading volume is less that gives low liquidity

low volume hinders analysis

price can be volatile and any one can manipulate the price

[Hariesh]

People avoid penny stocks because it has low volume and low liquidity.

[Ganesh Ramanan]

The possibility of scam rate is high in penny stocks, it has less transparency

[Darshan Arvindbhai Shah]

First of all ..

Market Capitalization are very low in penny stock  generally ,

Secondly ..

High  volumes can be seen in general may lead to some time high volatility, it includes the

risk of hitting the upper circuit or Lower circuit some times

 

Some times

penny stock may not behave  as per market accordingly,

if market goes up they may go up or may not or else they may go down

or if market goes down they may go down may not  or else they may go up ..

 

It becomes very unpredictable for any Technical Analysis to understand the price behavior in context to its Volume

and Hence penny Stocks are generally avoided by many people

 

[Author]

Posts