Are Free Penny Stock Newsletters Scams?

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If you’re even remotely interested in trading penny stocks chances are you’ve come across and perhaps even been tempted by all those free penny stock newsletter and alert services scattered across the Internet. Heck even I have subscribed to a few in the past, mostly out of curiosity – I mean they just sound so appealing; the ability to receive endless free penny stock alerts without having to perform your own research which, lets face it, can be a huge undertaking. But the reality is these free stock alerts are not what they appear to be. I’m not going to go as far as calling them scams but they are definitely not objectively chosen stock picks. How can I say this for sure? Read on.

Why Are They Free?
It’s simple logic really. Ask yourself this – Why would a penny stock guru go through all the trouble of finding and performing analysis on penny stocks with high growth potential only to give them out freely to anyone who subscribes to their newsletter? Simple – they wouldn’t, unless of course they had something to gain from doing so. Now I’m not talking about a penny stock advisor offering a few free stock picks as part of a free trial to their service; that is legitimate and something completely different. But aside from a free trial there really is only one reason a so-called “penny stock expert” would give out a steady stream of free stock picks indefinitely – He’s actually a penny stock promoter!

The Penny Stock Promoter
So what is a penny stock promoter? A penny stock promoter, or often called “penny stock pumper”, is essentially someone who heavily promotes a penny stock because he is either financially compensated for doing so (normally by the company issuing the shares) or he himself has already invested in the stock and wants it to artificially rise in price. Once the pumping has taken effect and the stock starts to climb, the pumper will eventually dump their shares making a handsome profit at your expense! Now you may ask yourself, but hey the stock climbed so won’t I make a profit as well if I sell? Possibly yes but more often than not these pumped up stocks will fall very quickly as the pumpers dump their shares, leaving you very little chance of selling in time. Actually this type of scheme has a name: “the pump and dump”. Some of these pump and dumps are so elaborately planned often by several different stock promoters that the stock will climb and climb for days, even weeks before falling.

How to Spot a Penny Stock Promoter
So you might be asking yourself how you can identify a penny stock promoter versus a legitimate penny stock advisor. Well, aside from the fact that a true penny stocks advisor would never freely give out his picks indefinitely, you can also fairly easily spot a penny stock pumper by reading the fine print! Seriously, if you look at any of these sites or the e-mails they send out, they must legally have a disclaimer stating that they were either compensated for their “stock picks” or that their picks should be considered advertisements and not actual stock picks!

What About One Time Fee Newsletters?
Aside form the “free” newsletters, you may also come across one time fee newsletters. Basically they offer you a lifetime of stock picks for just one initial fee. That may sound good to you and perhaps more believable but these “newsletters” are actually even more of sham than the free ones. Not only are they just giving you pumped stock picks, they actually got you to pay from them! Imagine paying money for someone to advertise to you instead of providing actual well-researched stock picks?!

My Recommended Penny Stock Newsletters¬† (Hint: they’re not free!)
So after all this you’re probably wondering whether there are legitimate newsletters out there that actually provide real and profitable stock picks? The answer is yes and guess what? All of them are not free! Instead, they are typically based on a paid monthly subscription. Now you may not like the idea of having to pay each month for a service but when you think about it, in this situation it makes perfect sense – If a professional trader runs a penny stocks newsletter and their subscribers are consistently making good money from the stock picks, chances are the subscribers are going to stay subscribed, I mean wouldn’t you? So it’s only in the newsletter’s best interest to provide top quality stocks picks that yield consistent profits, otherwise they’ll lose all their subscribers in no time (along with their reputation). That my friends is why a subscription based penny stock newsletter makes sense – it’s one of those rare win win situations.

So, without further ado, here are my two best penny stock alert newsletter recommendations:

#1. Microcap Millionaires ($97 per month) – Recommended for Beginner and Advanced Traders.
Micocap Millionaires is probably my favorite penny stock newsletter and alert service out there. It’s run by Matt Moris, a real down-to-earth guy who cuts the crap and simply gives out straight honest penny stock picks, the majority of which turn out to be profitable, some very profitable (100% and 200% gains are not uncommon). He provides 4 main types of stock picks (sub-penny stock alerts, bottom bouncer alerts, penny pump finder alerts, and reverse merger stock picks) all of which are long picks, meaning he selects stocks that have strong potential to go up in price. Since all his picks are long there aren’t any advanced trading techniques involved which makes this newsletter ideal for anyone interested in penny stock trading including new traders. In the alerts he sends out via e-mail and twitter, he includes the entry price (the price to buy at) and target price (the price to sell at). Now here’s some advice – follow these entry and target prices with discipline and don’t waver from them! Following them will make you some nice gains but ignoring his advice and getting greedy with a trade will more often than not leave you burned. Remember, you’re “trading penny stocks” not investing in them so stick to his picks and you’ll get the results.¬† Click here for Microcap Millionaires.

#2. Timothy Sykes Penny Stocking Silver ($99.95 per month) – Recommended for Advanced Traders.
Timothy Sykes is another guru I like. This is the guy who turned $12,415 in Bar Mitzvah gift money into $1.65 million all while attending college and has been featured in just about every major business and financial media outlet including ABC, CNBC, CNN, and the The New York Times. Tim’s primary strategy is to use these pump and dump schemes I was speaking of earlier to his (and his subscribers) own advantage. Essentially he seeks out these pumped up or soon-to-be pumped up stocks and either buys and holds them, temporarily riding the artificial rise, or shorts them on the fall and then covers his position for some very large gains. For those unfamiliar with shorting a stock, it’s basically selling stock that you don’t own and then buying them back at ideally a lower price. This is achieved by your broker “lending” you the stock during that period of time. Now short selling penny stocks can be a highly profitable yet very risky game to play as your potential for losses is technically unlimited. You are also often not able to easily short most penny stocks unless your online broker allows it. Still for more advanced traders, following Timothy’s techniques can make you some serious returns.¬† Click here for Timothy Sykes Penny Stocking Silver newsletter.

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1 comment so far ↓

#1 Matt on 12.11.11 at 4:03 pm

So in a way you are saying that you can make money from these free alerts but, you have to watch the market carefully and sell once it drops below a set price. Or have the stock for a short period of time and sell the stock within a couple days of buying it. Definitely not a long term stock!!

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