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7 Things You Should Know about Trading Penny Stocks

Feb 22 2012

Image representing Timothy Sykes as depicted i...

Image by Young Money Cover 11/07 via CrunchBase

Trading penny stocks has recently become a popular option for investors willing to take a risk for a quick turnaround. However, there are a few things you should know about investing in penny stocks. After all, these aren't the well known companies that you'll be buying stock in. In fact, it may be hard to find adequate information on some of the stocks you're about to purchase. If you want to go through with it, here are seven things you should know about trading penny stocks.

Penny Stocks are Less Than $3

Penny stocks are much more affordable than traditional stocks, costing less than $3. This can be a great way for those with little to invest to get started. You don't need a large sum to get started with trading penny stocks.

Profits Can Happen Quickly

One of the best things about trading penny stocks is that the turnaround can be very quick. Instead of waiting weeks or months to see a profit, you may see profits from penny stocks in a matter of hours. This means you will need to stay on top of your investments and check in throughout the day.

The Profits Can Be Huge

Penny stocks can offer a huge return. Financial guru, Timothy Sykes, was able to turn $12,000 into $2 million by investing in penny stocks. While you may not have as much success as Sykes, there's still a good chance you'll make a huge profit.

Portfolios Should Be Checked Often

Penny stocks are not something you can invest in and forget about. You need to stay on top of your investments by using a smartphone or staying on your computer. In other words, trading penny stocks can become a full-time job that will really pay off.

Penny Trading Requires Knowledge and Research

You have to be knowledgeable to invest in penny stocks. This means reading as many books as possible, constantly researching the companies you want to invest in and knowing how to stay one step ahead of everyone else.

Only Trade What You'll Willing to Lose

Trading penny stocks is a lot like gambling. The simple truth is that your investment might not pay off, which means you need to understand that you may never see your money again. In other words, don't invest more than you're willing to lose.

It's Risky

Last, but not least, trading penny stocks is risky. While the profits can be huge, you can also lose a large amount of money. This is why you need to be knowledgeable, do your research and stay on top of your investments.

Trading penny stocks can be a great way to make a huge profit. However, it can also be risky. Make sure you understand how the process works before you invest your money and remember to only invest what you're willing to lose.

About the Author: Erik Snellbaker is just now starting to invest in penny stocks. He spent quite a bit of time studying books by Tim Sykes and other professional investors for tips, tricks, and advice. If in doubt, seek professional assistance.

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