What are Penny Stocks
Have you been trading in the stock market for a few weeks now? Have you come across the term "Penny stocks" and wondered what it means? Why would anyone want to trade in a stock that is worth pennies? First of all, you need to understand that these stocks very seldom cost pennies. Basically, any and every stock which is worth less than $ 5 is known as a penny stock. Does that make them a little more appealing? Read on to find out more.
Penny stocks is a whole different world of trading which is far off from the media and glamour attached with regular stocks that are traded on all the major exchanges. These stocks are pretty much small companies that are just starting off on the stock market. They have huge potential for growth but at the same point of time, most of them fail. While you will not be risking as much as do when trading with regular stocks, you can make some huge profits by trading in penny stocks.
But just because none of the major news channels cover penny stocks doesn't mean that they are useless. Just think about it, even a huge company like Microsoft was a penny stock at one point. Just imagine how rich you would be today if you had just bought some shares in Microsoft back then? This should pretty much clear up any confusion with regard to penny stocks. If you still are a little unclear on the subject then read on.
What are penny stocks? Penny stocks are purchased just like regular stocks through your broker. These stocks don't even need to be listed on the major exchanges. And as the value of these stocks increase, you can see your profits climbing to unbelievable levels. And since they are priced so low, you can never lose too much money with them. You could say that this is a full proof system for you to make money. If only all penny stocks were like Microsoft. This isn't the case though with very few penny stocks actually making it into the big leagues. The rest of them just remain stagnant and eventually die down. One very important thing I want to tell you about penny stocks before you go ahead and buy them though is that you should only trade in them if you are active in the stock market. Penny stocks aren't something that you can buy and leave for months thinking that the price has to go up. You could come back after a month or so to find that the price of the stock hit a record breaking high and then fell back down to where it was when you bought it. You wouldn't want that now would you?
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