In recent years, more and more individuals are joining successful investors to trade in penny stocks. But what are penny stocks and why are so many traders interested in trading them?
What Is a Penny Stock?
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According to the SEC (Securities Exchange Commission), a penny stock is any security that trades under $5 per share. Penny stocks are often the shares of new companies with small market capitalization. These companies have little or no track record of success, which makes them speculative investments for investors and traders.
Why You Should Trade in Penny Stocks
Since penny stocks are cheap, traders require only a little capital to acquire a whole lot of them, and the price per share of these stocks usually increase as much as 100 percent or even more in just a single day.
Due to the low capital requirements, as well as the potentially huge gains to be made, penny stocks have gained popularity over the years, with virtually every kind of investor speculating on them.
However, it is necessary to point out the pitfalls of trading penny stocks.
Due to the volatility associated with penny stocks, it’s equally easy to lose all your investment capital — and even more, if you trade on margins. This is why you need an in-depth understanding of penny stocks, what to look out for when picking them, how to ensure that you’re paying the right price, and most importantly, when to sell them to make maximum returns.
Why You Need a Guide
However, acquiring such expertise takes time, exposure, years of practice in analyzing the markets, and a keen eye to pick penny stocks with high yield potentials. It’s best to follow the trades of successful penny stock traders, especially if you’re just starting out.
Such traders are experts in the industry and can help you avoid costly mistakes that could wipe out your entire investment portfolio. These traders have successfully traded in penny stocks for years, gaining enormous experience and expertise along the way.
They can provide you with valuable guidance on the risks, pitfalls, and opportunities in penny stock trading and allow you to learn from their mistakes and past experiences.
Since they are active in the markets, they can also provide you with tips that point you in the right direction and show you which penny stocks are worth investing in.
Although penny stocks are not right for everyone, they have a lot of advantages over other kinds of stock and can quickly turn your investment capital into a substantial sum if you trade wisely.
Those who lose money on penny stock trading often waste their investment dollars purchasing the wrong stock at the wrong prices and for the wrong reasons. They also end up selling at the wrong time. Such poor investment decisions can be avoided if you learn from industry experts.
By following successful penny stock traders, you can learn how to invest in penny stocks and you’ll be on your way to making consistent returns on your investment capital.