Buy Penny Stocks For Explosive Returns

If you have ever dabbled in penny stock trading, you know that they are one of the most high risk, high reward securities available. Because of their low share prices, it doesn't take much upward movement in their stock prices to reap fantastic returns. This is one of the reasons why certain investors like to buy penny stocks.

Penny stocks, also known as "micro cap stocks", are essentially common stocks that trade under $5 per share. Where to buy penny stocks, you ask? Penny stocks trade on the NASDAQ Small Cap, AMEX, Pink Sheets, or over-the-counter-bulletin-board (OTCBB). In the case of Canadian penny stocks, they trade on the Toronto Stock Exchange and the TSX Venture Exchange (TSXV).

Penny stock prices are volatile. Therefore, even a slight upward or downward swing translate into comparatively big percentage gains and losses respectively. For example, let's assume that you are buying penny stocks that are trading at $1.50 per share. If the share price rises to $2.00, you would enjoy a 33.3% gain. Comparatively, if we look at a conventional stock trading at $50 per share, the stock price would have to rise to $66.67 for you to enjoy the same 33.3% gain. That's how you hear stories of penny stock investors who got a 900% return - they had invested in penny shares that increased from $1.50 per share to $15.00 per share. Continuing with our example, the conventional stock share price would have to increase from $50 to $500 to achieve the same 900% return.

Some people have found that investing in penny stocks have enabled them to learn how to invest in the stock market with limited capital. Understand that in general, you should not invest any money in the stock market that you are not prepared to lose. Due to the speculative nature of penny stocks, you can lose your money if you don't know what you're doing. Therefore, it is highly recommended that you perform due diligence before buying penny stocks. There is lots of information on the Internet about penny stock research and even penny stock newsletters to subscribe to to learn about good penny stocks. Again, before acting on any penny stock recommendations, it is wise to do your own homework.

The penny stock market appeals to risky investors. However, just because they're risky traders, it doesn't mean that they are dumb. In fact, the winners are the ones who do their homework to minimize their risks. So what is your risk tolerance? Are you enticed by hot penny stocks? Through penny stock trading, it's possible to trade in pennies for dollars (hundreds and thousands).