Penny Stock Trading for the Beginner or the Pro

Posted by Nick Niesen on November 8th, 2010

For those wanting to get a taste of trading, but do not know much about the stock market, penny stock trading is a great place to start. They are stocks that trade for as low as 1 cent, but they cost no more than $5. Penny stock trading can help the beginner investor learn the ropes of trading, whereas experienced investors use them to expand their portfolio and make a higher profit. In other words, although penny stock trading is great for the beginner, the experienced investor can put them to work as well.

There have been some well-known companies that once started out as Penny Stocks. Take Google, for instance. The company was trading for pennies and now trades upward of $500 per share. This doesn't mean that every penny stock will make investors millionaires, but penny stock trading possesses the potential to grow money. Penny stock trading also possesses a certain degree of risk just as all stock trading does.

Although penny stocks are considered high risk, it is possible for massive gains to be achieved. The reward is eventual and that is what attracts so many people to them. They have a quick turnaround on such a low investment. Some have been known to double or triple their earnings and, for those who have invested in stocks such as Google, have made thousands of times their investment.

However, one of the hardest tasks in penny stock trading is choosing which stocks to go with. There are definitely many of them and getting information on a particular company is sometimes close to impossible. There are absolutely no shortcuts because a lot of homework is required such as looking at the 52-week highs and lows, checking out the latest news regarding each company, and study the price to earnings ratios. Sure, this can require a few hours a week, but it is fair to say that the investor who does their homework is certainly working for their money. That makes the income achieved from penny stock trading a little less passive and a little more aggressive.

Nevertheless, some investors choose to outsource the research because they may not have the time to do it themselves. There are many companies that specialize in stock research and can develop recommendations as to what stocks are the best stocks to invest in. Sometimes, they give the investor the option to pool their money with them into an investment fund. However, it is good to keep in mind that these research companies are comprised of human beings and there is still margin for error, but they are professionals.

Whether the investor chooses to do the research on their own or have a professional do it, penny stock trading is still a lot of fun. It doesn?t matter if the investor is a beginner or a seasoned investor because the challenges are all the same. It is just a matter of finding the right penny sock, taking the risk, and running with it. In the end, it can really pay off.