Technical analysis is an exploration of the trading chart of a certain companies stock to look for trends, patterns, and hopefully predict future increases or decreases in the price. For this examination to work accurately the stock needs to have a high level of trading activity. The high trading volumes in big name investments make technical analysis of the company's trading chart possible and improves the accuracy of those predictions. Penny stocks lack the critical mass of trading volume to enable standard technical analysis. It is more difficult to predict how a penny stock will fluctuate on the market, which makes the risk for return even higher. Penny stocks are considered higher risk than other companies trading at high prices because inexperienced investors have lost money, and quickly.
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