Penny stocks can be both a great way to make money trading stocks, as well as a great way of loosing money all at the same time. These stock types are considered to be those whose values are less then $5 which allows even the slightest gain to become very profitable. But where there are good returns, there is also higher risk and a slight drop in value can equal dramatic losses for an investor
Why penny stocks are called pennies?
Basically any stock whose value is under $5 is considered to be a penny stock. They can be found on the major indices as well as off of them. Think of a penny stock as nothing more then pennies on the dollar because when compared to fortune 500 stocks values they are just that.
Why should I trade penny stocks?
If you had a hundred dollars to invest in the stock market, would you purchase one share of stock at $100 or purchase 100 shares of stock at $1 each? For the quickest return you would get the lower valued shares because they can double or triple their value in a few minutes time.
Does everyone trade them?
Just as pennies can increase in value quickly, they can also decrease in value. If you bought a hundred dollars in them at a dollar a piece and they suddenly fell to $0.25 per share, you would have lost 75% of your initial investment.
What makes a good penny stock?
Finding information and resources on pennies is no easy task. Most of them do not belong to a major index and therefore are susceptible to incorrect and also tainted numbers to make them seem more appealing.
Are pennies worth the risk?
There are many people who invest in pennies each and every single day. Some of them are new to investments while others are veterans to the game. If you choose wisely and win more then you loose, then they are worth the risk.
Use your best judgment when choosing to invest in pennies and remember that you can only loose as much as you are willing to invest. Assuming that you keep emotions and gut instincts out of the equation, you will find that you ability to win more then you loose will greatly improve and when in doubt about a particular penny, stay away from it altogether.
By: R. Branson
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Before you decide to buy penny stocks you will need all the information you can get. Visit the authors website for the answer to the question what are penny stocks?