Penny stocks are risky investments. If you were not frazzled by that statement, you may have found your calling. Amassing penny stock fortunes is not easy but with a little commitment to gain the required knowledge, penny stock trading can become an acquired skill that pays off big time!

The Securities and Exchange Commission (SEC) defines a penny stock as any stock that trades under $5 per share. These investments typically trade on the NASDAQ Small Cap, AMEX, Pink Sheets or over-the-counter-bulletin-board (OTCBB). Penny shares are high risk, high reward securities - this is a fact that can be written in stone because it will never change. The potential gains can be phenomenal, often in the hundreds or thousands percentage return on investment. The potential losses can be devastating but limited to 100% of what you invest. Therefore, a $1,000 investment can drop to zero and you're out of luck. Or it can increase to $50,000 or more, or anywhere in between and you can do some serious shopping. It would be naive to invest any money that you cannot afford to lose in the stock market so act responsibly.

With some work and commitment, you can learn ways to improve your success at picking good penny stocks. It would be foolish to think that you can never lose but the secret is to trade in such a way that guarantees that the gains more than offset the losses. Going into detail about specific strategies is beyond the scope of this article. There is a vast amount of information on the Internet that can help you acquire the knowledge and services to succeed in penny stock investing.

Before jumping in to buy penny stocks, ensure that you have educated yourself and know what strategies you want to utilize. If you are a novice, it's particularly crucial that you familiarize yourself with basic investing terms and concepts, and pay special attention to those that pertain specifically to penny stocks. Consider paper trading first to learn the inner workings of the penny stock market and watch your confidence rise as your trading skill develops. With paper trading, you are not risking any real money while you learn.

Decide whether you will be solely conducting your own research, monitoring and trading of stocks or will you enlist the services of a professional penny stock pick company? There are many online stock pick services available so choose to deal with only reputable ones. If you don't already have a broker that you currently do business with, choose one from the many available penny stock brokers. It is recommended that you go with an online discount broker to keep your trading commissions low.

Learning how to buy penny stocks well could be a profitable venture. Regardless of what your goals and objectives are for investing in these securities, honing your penny stock trading skill is money in the bank.