7 - BE BEARISH UPON REVERSE SPLITS Many stocks in the penny stock world attempt the neat trick of a reverse split. A reverse split is the same type event as a regular stock split, however, with a reverse split the amount of your shares decreases. Companies often use a reverse split as a last ditch effort to prop up share price or to reduce a bloated share count. Although the concept of "always" does not exist in the trading world, one can come quite close to saying that stocks "always" decline immediately subsequent to a reverse split. If you own a stock that announces a reverse split, you should sell it quickly. If possible, try to short stocks right after a reverse split occurs.