Why ETraders ask why investors pay attention to penny stocks ? Because ETraders are clueless about penny stocks. So instead of doing their own research. They ask for information, tips. However, the more you're removed from the source, The more the signal to noise ratio decrease. I know a chicken that know a bear that invest honey in penny stocks. From sure sources he told me there is plenty to be made. That's why bees are flying all around Mr. Bear. He knows that it's time to sell. Bees and bears transact. Everyone's happy. Not the bees.
But how to short these is the million dollar question. Between punishing short borrow rates, collateral requirements, and just complete inability to find the stock to borrow in order to short I've found it very hard to do in practice. Would love to hear tips from anyone who's had success in this area.
You can find and trade good penny stock using scanners that id price movements and volume. If you only trade stock with daily vol over 1M there is usually enough liquidity to trade in large enough quantities for the small investor. You would want to 1st define penny stock as many refer to penny stock as stock under $5 and others stock under $1.
Can I consider a penny stock as a way to learn how to analyze and assess the risks? As I understand it, even if a stock falls, traders and investors don't experience significant losses.