Warning Signs

Signs of a stock unsuitable for trading

1. Extremely low dollar volume.
2. Long periods of time with little to no trading volume.
3. Large spread between the bid and ask prices.
4. Large, sporadic changes in price on low volume. 
5. A stock with a long-term negative trend.
6. A broker restriction on buying or selling the stock.
7. A history of halted trading. 
8. Long waits to get your orders filled. 
9. Signs of fraud or dilution.

Signs of Dilution

1. Inability to get a current share count from the company or a gagged transfer agent.
2. Increasing outstanding or authorized share counts. 
3. Constant decline in price with increasing volume on chart. 
4. Decline in price with no material event as a cause. 
5. Large, even blocks of shares continually hitting the bid. 
6. A history of reverse splits after running the share price into the ground. 
7. The opening of a 504 Reg. D program. 
8. Heavy coverage by penny stock promoters, mindless pumping on message boards and spam emails. 
9. History of "pump and dump" action on the chart and quick runs of one to three days followed by steep, high volume drops.
10. Blaming low price and decrease in price on shorting and market-makers.
11. Convertible debenture programs disclosed in financial reports or company communications.
12. Several signs of being a fraud.

Signs of Fraud

1. Lack of communication from the company. 
2. No verified, legitimate physical place of business. 
3. Over-optimistic, hype-filled statements from the company. 
4. Press releases with vague, inconclusive language, insubstantial details and/or no hard numbers.
5. Multiple press releases in a day, week or other short period of time falling into the category above.
6. Company officers or employees involved in other penny stocks.
7. Incomplete or unprofessional looking website with very old updates, or a site used for direct shareholder communication. 
8. Brand new flashy website and corresponding press releases providing only bits of vague information.
9. Business models or products that raise the question: "Would I buy this product?"
10. No follow-through on promises by management regarding financials, share structure updates, uplistings, etc.
11. A company that seems focused on the stock price and not the business.
12. A company that pops up quickly into a newly hot business sector, often based on world news. 
13. Employees immediately dumping stock received through a compensation program.
14. A history of company name changes, symbol changes and reverse splits. 
15. Dilution