Why do so many penny stocks suddenly get restricted when they start running?
I understand that Trading 212 says these restrictions are related to risk management, liquidity, volatility, etc. But honestly, it’s becoming extremely frustrating because it seems like so many penny stocks get a trading restriction precisely when they start gaining momentum.
What I find particularly strange is that you can own the exact same penny stock beforehand without any restriction. You can buy it while it’s sitting there with low volume and barely moving. But as soon as volume comes in, the price starts running, and more people want to buy, suddenly there’s a restriction.
And what makes it feel even more counterintuitive is that the restriction often seems to be on buying rather than selling.
If the stock is supposedly too risky or volatile, why was it perfectly acceptable to buy it when it was going down or sitting at a low price, but then suddenly too risky to buy once it starts going up?