Penny stock trading – is it worth?

penny stock trading

penny stock trading

The beginning of everything starts from a scratch. A business starts with the available but least resources, the higher level studies begins with the lower basic knowledge and the heavy investment starts after the little investment. No one stakes his huge resources at the first level only! Penny stock trading means trading in the stocks that no longer trade over $1 on NASDAQ. These are the stocks which have lost public interest and have fallen from grace. But that doesn’t mean that there is no scope of trading in them. It is because people still invest their pennies in these stocks and make huge money out of this.

There is no doubt in stating that investing in penny stocks is a risky business. But it doesn’t mean that it is a completely futile to invest into them. Here are some of the measures that the investor must undertake before investing into the penny stocks.

  1. Bulk dealing: The price of these shares as mention is near to or less than $1. Due to this a slighter upward raise can make you profit only if you have enough quantity of it. Similar is the case with loss! A slight decrease can make you sustain huge losses. But it is the normal game in trading penny stocks because here the probability of losses is more than the probability of gaining. So before buying lookout for the shares which you can buy and also see the demand of the shares so traded.
  2. Newsletters and Review booklets: Of course the newsletters say all the pancake things for the company trading as penny stock. It is because the newsletters are being paid by them. But what is to be seen behind the bars is that the prospects of the company which are mentioned are genuine and have proved successful in the past. One more plus point that goes towards the company is that company is making advertisement which is the best source to reach to the masses. If the company is proclaiming something in the newsletters then certainly it may be having very strong grounds.
  3. Perform your due diligence: These companies also have to release their financial statements for public viewing. These statements are wonderful tool to analyze the actual position of the company. Make a deep investigation into the facts and figures of the company to make sure that the stock in which you are interested has been mentioned in the statements. Your due diligence and your effort will make you learn that how to trade penny stocks and judge the financial standing of the company.

Thus trading penny stocks is worth according to those who have actually made money out of it and for those who lost millions strictly say a no-no! It is not a straightaway no as these companies are also working with a hope of a bright and wealthy future but yes the investor has to be very careful of his investment techniques!

So, make sure that you read the warnings from regulators and do your homework before heading into this venture.