Penny stocks aren't always valued at a penny per share. Some may be as
high as a dollar. Many people shy away from them because they appear
to offer the lure of getting something for nothing. If the amount of
money that you have available for stock trading is limited investing
in penny stocks could be a smart stock investment strategy for you.
For example, the recent closing price for Google was $438.77 per
share. To purchase 100 shares you would need over $43,000 available.
If Google went to $440.77 per share your total earnings on your
$43,877 investment would be a mere $200 or a 0.4% return on
investment.
On the other hand if you purchased 1000 shares of a stock at 10' per
share, and that stock went to 15' per share, your $100 becomes $150 or
a cool 50% profit. If that 10' stock instead went to a dollar or even
$10.00 per share, your earnings would look awesome indeed. You do the
math.
Penny stocks often have extremely high trading volumes. When an
investor can buy such a huge number of shares with $1,000 or $10,000,
it can leave the volume patterns for a penny stock looking similar to
one of the S&P 500. This high trading volume can also lead to very
high volatility. A stock may reach an all time high and stay there for
only minutes.
As with any stock, you should always do your own homework and trading
experts seem to agree that if you do trade penny stocks you should
probably do that homework twice. Know the profitability of the
company. Be very aware of the trends associated with this stock and
its industry. Make a game plan and stick to it. Buy a stock only at
the price you intended to buy it and sell it at the price you intended
to sell it, always protecting yourself with a stop loss order to
prevent you from losing everything if the price happens to crash.
As always, never ever let emotion enter into your trade. For some
people, penny stocks offer the same excitement as of nickel slot
machine. And many of these people walk away from penny stocks as broke
as when they leave those nickel slot machines.
I tend to receive a lot of e-mail stock tips about penny stocks. I
have never purchased a stock based on one of these tips alone. There
were a couple of times when I looked into the company and it appeared
that I could make a solid trade. However, my buy price never came
around so I didn't buy the stock.
As part of your all overall stock investment strategy you may want to
consider putting some of your investment money into penny stocks. Keep
the amount of money limited-not more than 10% of your total trading
cash-and look over every stock trading opportunity with a fine toothed
comb. As you develop skill and experience as a stock trader you will
come to know the fact that the deal of the century tends to come up
several times a day. You just have to know how to find it.
Automatic Way To Invest Just Like Warren Buffett: http://buffettsyst.key.to/
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