subject: Penny Stocks - Worth The Risk? [print this page] Is day trading penny stocks the direction that you really want your investment activity to head toward? Many people steer clear of trading in penny stocks and with good reasons. There are many fables of the traders making serious money from a single penny stock, but they are usually preceded by the failure f several stocks that no-one talks about.
Penny stocks are known to enable you to either make or lose masses of money. Lots of people become inspired to try their hand at day trading penny stocks when they hear stories of investors winning big in just a few days, what they don't hear is that many of these investors then went on to lose it all shortly after.
Penny stock trading is nothing more than gambling in a nice suit with a respectable haircut. Yes, there are people who make lots of money via this avenue, but they can do this because they know exactly what they are doing. Penny stocks are a gamble because you are basically buying stock for less than $1 which means there must be a goof reason for the company to be in this state.
Usually the reason can be traced back to mismanagement, bad economics are a mixture of the two. Before you invest in this cheap stock it is vital that you have a valid belief that this company will managed a turnaround and make you investment worth it.
Day trading penny stocks is so risky because it doesn't take much to affect your investments. An example you could use is, you buy into a company for 25 cents per share and the next day your shares are worth 50 cents a share, you have just double your money. This can also happen the other way.
Whilst a 25 cent swing in regular stocks is barely a dent these can mean life or death for your penny stocks. This means that you should learn how to spot companies with a great potential to turn themselves around before enter this fast paced world.
You should always remember that most of the top investors in the world invest in stocks that are stable and have a long history of doing well and have shown long-term profitability. Instead of investing in companies that are doing well, you are investing in companies that have shown that they can't do well in business. Okay, sometimes turnarounds and miracles happen but not very often.
If you do plan on trading penny stocks you will need to be able to tell which companies are abut to pull a turnaround and when you need to jump in. It is not impossible to make money via trading penny stocks, but you need to know what you are doing and be able to monitor your stocks closely at all times.
