Penny stocks are high risk securities that cover small companies in the market. However, many people are apprehensive of buying these types of stocks because of their low trading volumes and high volatility. This means that the stock values rise or fall within a short period of time. Penny stocks normally cover startups, unproven software companies as well as new mineral explorations. All these companies sell stock in low volumes and at prices of below one dollar. This makes penny stocks very volatile and thus, can lose large value within a short period of time. Timothy Sykes explains why regular traders should consider trading in penny stocks.
You can win in the future
With proper research, you can be able to find companies that are trading in the penny section but have potential to grow into large companies. These companies might be technology startups, tech companies as well as financial companies with revolutionary products in the market. Although most startups play in the shadows, they have the potential to become great companies in the future. Therefore, if you are able to invest in such companies, you could end up striking it big in the future.
Companies that have the potential to grow into something big share several characteristics. To begin with, the companies have a clear product line that solves specific problems in the market. This is very important for it has a promising potential for growth. Therefore, if you are able to identify a company with a unique product with a clear niche in the market, you should consider investing in its penny stocks. This is because. They have a high potential for growth in the future. If the company hits it big, you are going to reap big from your investment.
A company with potential has stellar financial positions, skilled employees and an increasing market share. In addition, a company with potential has innovative ideas that have the potential to disrupt the main players in the market.
Sometimes, small time investor can find the stock market very frustrating. These people admire the big players who buy and sell regular stock in large numbers. Luckily, penny stocks present you with an opportunity to level out the playing field by employing the right strategies. And although penny stocks are very risky, they present an opportunity for the small investor to improve their financial situation.
Expand small investments
If you are a fresh graduate who has just landed his first job, penny stocks can come handy as a viable form of investment. This is because, many young people are apprehensive of making regular stock investment. That said, with abut $500, you can get thousands of penny stock shares. However, the same amount will give you only 4 or 5 shares of a large company. As a result, penny stocks are seen as a way to magnify your investments.
Investing is exciting
Another reason why you should consider investing in penny stocks is because the investment is very exciting. it always feels good to earn even 2 percent in dividend out of the investments that you have made in securities. This is especially considering the ups and downs that traders face in a year while stock trading. In the regular stock market, it is difficult to see stock price rising by over 50% in value in one day. However, penny stocks can rise by 200% in two hours.
Shares comes at small prices
Another reason why regular traders should consider getting penny stocks is because of their unbelievably low prices. You can find a share that is selling for about $0.001 and think that it’s silly. However, such a share price can either move up or down. At that share price, you can possibly buy billions of shares from the company. And if you are lucky that the share prices go up, you can make some good money in the process.
Penny stocks are seen as the small time alternative to the regular stocks in the market. However, they hold a lot of potential for the small investor as they give them a chance to maximize on their earnings through stock trading. But unlike regular stocks that are traded in major exchanges around the world, penny stocks are largely unregulated and this makes them very risky. You can find them being traded on bulletin boards, local exchanges and even on online platforms. However, they are worth investing if you understand how they operate.
Video – What do Traders do?
Traders buy and sell things. They may trade in currencies, stocks, commodities, and other goods and services.