What is penny stock? How you can one make fast money? Who are the operators of these stocks?

Penny stock Is an attractive word for many retail players. Stocks are classified according to their market capitalization.

Some of these penny stocks can turn into a real multi-bagger 💸💸  like RUCHI SOYA. If you had invested 16 INR in February then now it would have been 1005 INR.

These stocks are like mining gold from gold mines whether they find gold or not completely depends upon their luck, so it's an opportunity as well as threat.

Following are some of the features of these stocks :

1.       They are cheap so you can buy any number of stocks.
2.       They have really high returns so you can become rich in less time.💰💰

How Awesome it is right!!!!

But wait, friends lets now discuss some downside of these stocks:

1.   Illiquidity: - These stocks are illiquid so volume is very low and if you enter in this it's like Abhimanyu trapped in chakravyuh. Because this chakravyuh is operator driven.
2.  Targets are uneven as these stocks are sentiments driven so applying technical as well as fundamental analysis on these stocks is difficult. 
3. Scams in penny stocks is a common thing. These scammers are called operators of that stock and you can get trapped in it.  

So it’s like a blind betting.🙈🙈

Now let’s move to the next segment and let’s discuss about the operator.👀

As we know that the volume in this stock is very little so Operators buy the stock at its peak price due to which they get major trading shares and due to which we can commonly see upper circuits in such stocks. When a retail investor sees such kind of stocks he compares these stocks with some multibagger stocks and applies his major capital in it to become rich overnight and get trapped in it. When these operators start booking their profit lower circuit takes place due to which stock value drops a lot. Please don’t think of becoming an operator also because remember you are not the only Blue whale in this ocean. These operators get also majorly trapped sometimes.         

Penny stock have high volatility but low liquidity and Almost half the shares priced below Rs 10 have not been trading for the past five years'

                                                                               

Big Investor pump a lot of money and become the operator of this stock and retail investors get trapped in it. It's like a pump and dump system.

 

Conclusion: - So it's better not to invest in it. If you want to make some consistent money invest in Large-cap or Mid-cap stocks because scams in these stocks is not common and rarely anyone can drive their prices as their market capitalization is huge.

References:- 

For Zerodha account opening, you can use my referral:-

https://zerodha.com/open-account?c=SA5886

Some beautiful insights about penny stocks is present here:- https://economictimes.indiatimes.com/markets/stocks/news/can-penny-stocks-make-you-rich/articleshow/48304754.cms

Some information about capitalization and features about penny stocks is present here:-

https://groww.in/p/penny-stocks/