"Red hot" is an over used and exaggerated expression predominantly employed by US market tipsters, usually promoting a tip sheet or market news service. "Red hot penny stocks" - perhaps the most common example - is used by tipsters to indicate they have identified cheap stocks which they believe will very shortly increase dramatically in value. This is often accompanied by the notion that the market has missed something and there is a chance of beating the big market players. These sort of sales pitches identifying apparently undervalued stocks are often aimed at small investors with limited finances. The low cost of the shares and the promise of high returns can seem very attractive.
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US Investor Relations
In the US there is also a trend for some investor relations (IR) companies to use similar language. IR companies are paid to promote specific company stocks, their aim is to help sell shares and raise the value of stock. Sometimes it can be difficult to tell the difference between a tip and a promotion. Though IR adverts promoting stocks in the US have to carry a disclaimer.
"Red hot penny stocks" - perhaps the most common example - is used by tipsters to indicate they have identified cheap stocks which they believe will very shortly increase dramatically in value.
Penny stocks are shares of small companies that trade at $5 or lower. They've also been called microcap stocks because their market cap lies between $250 and $300 million. A company that makes it big has a massive upside, but most penny stocks end up losing money.
Yes, you can make money with penny stocks, but you can also make money playing the lottery, though you probably won't. To make money in penny stocks, you have to be able to separate the good companies from the bad, and that means you have to be able to analyze companies.
Some professionals recommend that you devote no more than 10% of your individual stock holdings to penny stocks. It's also important to understand your risk tolerance. Generally speaking, the higher your risk tolerance, the more equipped you are to take on the risk that can come with investing in penny stocks.
It's rare for a penny stock to be a long-term buy-and-hold investment. The sector is built on short-term trades. If you notch a sizeable gain over a short period, book it now rather than waiting for bigger profits that may never materialize.
Can you make money with penny stocks? Yes, you can make money with penny stocks, but you can also make money playing the lottery, though you probably won't. To make money in penny stocks, you have to be able to separate the good companies from the bad, and that means you have to be able to analyze companies.
Penny stocks are generally stocks that trade at less than five dollars a share. This relatively low price per share can make them attractive to many investors with limited resources. Penny stock promoters often reach out to victims by cold calling them. Use this information to recognize and protect yourself.
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