| Penny stocks is the new hot thing. Since the major | | | | business yet. Without products they probably don't |
| markets crashed in late 2008, smart investors had to | | | | have any real fundamentals to look at. A lack of |
| venture into new territory to find good trading | | | | company information can mean a very risky trade |
| opportunities. The days of being safe in the major | | | | and if you haven't got any fundamental analysis in |
| markets came to a crashing end and companies that | | | | place, picking these stocks can be a bit of a blind |
| we all though will never fold, got wiped out - even | | | | man's game with dire consequences. |
| after millions of dollars of government funding to try | | | | 3. Penny stock companies are often ahead of their |
| and save them. Two years ago most traders would | | | | time |
| have laughed at the mere thought of trading penny | | | | Penny stock companies are often companies with |
| stocks, but in the current economic climate it's | | | | some sort of advanced technology that's not yet in |
| become a real opportunity. | | | | the mainstream. Chances are that they could not get |
| The stocks are different. If you try and trade them | | | | sufficient funding via conventional means simply |
| using your normal trading strategies you might end up | | | | because their product is something completely new. |
| burning your fingers. Trading them successfully can | | | | A good example of this was back in the dot com |
| be a bit of a steep learning curve, but in the end the | | | | boom of the late 1990's when a lot of internet |
| rewards may just be worth it. | | | | technologies was born from "wacky ideas". This |
| There are 3 main reasons why a penny stock is not | | | | made a lot of traders and entrepreneurs very |
| an ideal investment. Let's briefly look at the 3 main | | | | wealthy - even though the whole bubble burst soon |
| reasons why you should not trade them: | | | | after. Sometimes these technologies never come off |
| 1. Penny stocks are stocks of speculative companies | | | | the ground - leaving you out of your investment and |
| With stock prices between 10 cents and two dollars, | | | | your money. |
| the main aim of these companies is to get venture | | | | Nevertheless, penny stocks can be a great way to |
| capital. They have great ideas and big dreams, but | | | | make money trading. Despite the risks, the |
| they need investment to realize their ideas and | | | | opportunities are huge and with a little education and |
| products. Unfortunately, like many entrepreneurs their | | | | some persistence you can make returns unlike |
| dreams can be too big for their abilities and they | | | | anything you will ever get on the major markets with |
| often fold even before their companies start doing | | | | overpriced stocks. The key is to learn the ins and |
| business. | | | | outs of trading these stocks and to trade them well |
| 2. Penny stock companies have no revenue and no | | | | and with caution. Follow the rules and eliminate as |
| profit | | | | much risk as possible. In the end penny stocks still |
| Because these companies are mostly start up | | | | offer a great opportunity and with very little capital |
| ventures, most of them are note even doing | | | | you can make some great returns. |