Trading Penny Stocks

Many people are attracted to penny shares because they see it as a way to make quick money

. sadly not many have a clue about what a penny share actually is. In fact they are what they mean. Penny shares are normally shares costing less than 100 pence. Another part is that they are normally in a small company

It is important you understand one important thing about penny shares. If you sell them soon after you buy them you are guaranteed to make a loss, because the difference between the bid and offer price will always be greater than 10%. This means you'd be selling at 10% less than you bought them, and obviously that translates into a loss.

People obviously buy penny shares to make a profit. It will however not be quick, but it will happen if the company you have bought shares in improves its performance. When this happens the price of the share you bought will rise.

All this sounds very simple, but you will discover very quickly that a company whose shares are in the penny shares category are there for a reason. They probably have few assets, or have been in difficulty, perhaps they are simply very new. Given a choice it appears a new company is the least risky.

It is the risk that makes penny shares attractive to investors. It's a gamble, because you just don't know what will happen. So a bit of commonsense should tell you not to take the risk if you can't afford to lose. In other words don't bet your house on penny shares. You will be tempted at times, but be sensible.

The key to successful investing in penny shares is research. The information you are looking for is readily available starting online, and including newsletters. Just remember that it is a gamble, and occasionally, very occasionally you can do very well indeed. A share rising from 10 pence to 80 pence is not unknown and if you had bought 10,000 worth, then you will be happy indeed.

by: Gene Murphy

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