| Penny stock trading is a special type of stock trading | | | | municipalities, just to find penny stocks. Many people |
| that requires some diligence. Penny stocks are | | | | compile and sell lists of penny stocks. A simple |
| considered high risks, so many of them cannot be | | | | Internet search will turn up thousands of these |
| easily found by looking at stock lists. In fact, making | | | | people. But, you have to be real careful about your |
| money with penny stocks is probably 90% finding | | | | sources, as some lists are worthless. |
| the stocks and 10% choosing the winners. | | | | After you have your penny stock list, you shouldn't |
| There are many penny stocks that are undervalued | | | | just throw money at the stocks on the list hoping |
| simply because people aren't aware of them, but | | | | for success. The odds just don't work out this way. |
| many penny stocks are not undervalued. So first you | | | | To put the odds in your favor, keeping in mind this |
| have to find penny stocks, and then you have to | | | | still doesn't guarantee success, you need to carefully |
| gather what little information is available and try to | | | | research each penny stock you buy. Some of these |
| make an educated guess about which ones will | | | | stocks may be released by unscrupulous people |
| succeed. Information on each stock is nearly as hard | | | | trying to make money off of penny stock investors. |
| to find as the stock. You shouldn't put too much | | | | The majority are small corporations that are trying |
| money into any one penny stock, as these | | | | hard, but more often than not these startups |
| companies often go out of business. | | | | eventually fail. So how do you figure out which penny |
| You may be wondering why you would want to | | | | stocks have the highest chance of success? |
| invest in the stock of a business you know little | | | | You need to do grunt work. You can start by using |
| about that has a good chance of going out of | | | | Internet information resources to weed out obvious |
| business. Well, to answer this let us consider what | | | | losers or pick out companies that just don't seem |
| would happen if you spent $100 to buy 20 shares | | | | right. Testimonials you find online may be useful too. |
| ($10) each of ten penny stocks that were 50 cents | | | | But, after that you need to get more detailed. Figure |
| per share each. Let us say that when you sell them | | | | out if you know anyone at any of the companies or |
| in a year, 7 of them have become worthless, 2 | | | | in the areas of the companies. Call the Better |
| maintain their value, and 1 goes up to $10 per share. | | | | Business Bureaus and Chambers of Commerce in the |
| The seven lost $70 of your investment, the 2 | | | | areas where they do business. Don't be afraid to call |
| returned your original $20, and the 1 is now worth | | | | the company and get a gut feel about it. Try to get |
| $200. So you invested $100 and now you have $220. | | | | a good feel for what kind of business it is, what type |
| Keeping in mind that this is hypothetical; this | | | | of business model it uses, the backgrounds of those |
| demonstrates just how profitable penny stock | | | | running the business, and the prospects of that type |
| investing can be if you occasionally get one right. The | | | | of business in its area of operation. Without such |
| problem is that many people miss on all of them. | | | | diligence, penny stocks are generally a losing |
| It takes a lot of careful Internet research, and | | | | proposition. Those consistently successful in penny |
| sometimes even public records research in all sorts of | | | | stocks always do their homework. |