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Penny Stocks: What To Know Before You Invest

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What You Need to Know Before You Buy Penny Stocks.

Penny Stocks are volatile, meaning they can increase as well as decrease in value within a short period of time. Due to this volatility penny stocks are often the preferred investment or trade for those who are trying want to invest a small amount of money for the chance to cash in on large gains.

Beginner penny stock investors are always looking to buy low and sell and high. These small cap stocks can provide the best chance to accomplish the buy low sell high trading strategy all penny stock traders aspire to. Penny stocks offer potential greater percentage gains in a shorter period when compared to large cap stocks like Google, Twitter & Facebook.

While there is great potential for gains when trading penny stocks there is also great risk for massive loss. These small cap equities can move down just as quickly as they move up. Volatility, lack of current information, light trading volume, manipulation and shady stock promotion all play a role in the risk when trading OTC Stocks. For this reason, penny stocks are classified as a speculative and or a high-risk investment or trade and therefore should be treated with extreme caution.

Should I Buy Penny Stocks?

Investing and or trading in penny stocks is the ultimate stock market example of risk vs reward. These stocks usually have a lower market capitalization and are often called Micro Cap Stocks. As previously stated, one of the main reasons people are interested in penny stocks is the ability to invest a small amount of money and have it yield potential huge gains, for example a penny stock trading at $0.01 only needs to increase by a penny ($0.01) for the investor to gain 100% return on their investment. For a company like Google, Facebook or Twitter to do the same, the investor would need to wait for the stock to increase by much more than just one penny to see 100% return on investment. Just like the aforementioned example, if a penny stock moves down by a penny or even half of a penny, the losses are just as drastic.

The main goal with any investment or trade is to make money. The best way to ensure success in any trade or investment is to learn the skills and strategies associated with the type of investment and trading you are interested in.

By A. Lawrence

I like to write about what interests me. After making money with penny stocks in the past, this micro-cap stock market is very appealing. There are so many opportunities out there and I will cover them all. Favorite sectors: Tech, Cannabis & Biotech

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