Laziness

Let's talk first about laziness, i.e., "relying too much on others' opinions".

it's good to get opinion in the market- even non-expert opinion is useful because it tells you a little bit about possible trends. but laziness is a criminal offense when dealing with your money. i've watched knotheads do this time after time- and lose their shirts. they run in to some forum and ask what they should buy. the subtext is, "What's everybody else buying?" so then they buy, and the pps (price per share) crashes. and then the thread on that stock grows and grows in direct proprotion to how much money people lost.

it helps to understand the mechanism behind this effect. there are two major forces behind it and one lesser force. in penny stocks, the two major forces are market makers and institutionals. the minor force is shrewd, experienced traders. so when you see everybody else buying, these forces also see it. they know that most of these new trades are made by weak-kneed newbies who haven't got a clue. so at a certain point, these forces sell off their holdings, taking profits, and that crashes the pps. in pennies, you as a retail investor cannot engage in short selling ("shorting"), but the market makers can, and they do, with a vengeance. i'll probably talk about shorting in more detail later, but for now just understand that shorting is a complicated way to make money when a security's price is going down. so it's often in the mm's best interest to see it crash and make them money, then much later they come back and sell the shares again for fresh profit as the pps rises.

So, bottom line, when you're lazy and just follow the herd, you're on a sure path to the slaughterhouse. so what you need is to be able to pick your own stocks, and beware of stocks getting too much attention. we'll get to how to make your own picks shortly...