Penny stocks are indeed risky, but what do you lose anyway? Living without $20 or $30 is feasible, unless that's all your left money, haha. In my opinion, penny stocks trading isn't that bad and you could make some profit out of it, but if you see that you can't have any fruition of it, just cease going by this method. You will see that its effects mainly resemble gambling, and you are lured in to invest more and more, until it becomes just like FOREX, for example. Take care.
Like if the company is a small printing operation. What they print though is the identifying paper that goes around and sticks to the quarts of oil that you buy in an auto parts store. They may have just started and you don't know exactly how their business is run (Which is what makes the stock so volatile) but it is indirectly tied to he oil industry, which is as sure of a bet that you can take. In that scenario, I would invest.
Yeah you shouldnt get involved with trading that your not 100% sure what your doing. It could backfire horrible. Trust me, it happened to me. Id still recommend penny trading if your ready to take the risk.
I think you can make money with penny stocks, but I would never invest in them without expecting to lose that money. Then, if you lose out, you don't feel like you lost anything. I would only invest small amounts. I reserve my larger amounts for big, well-known companies that I feel confident are not going to tank anytime soon.
One thing to watch out for with penny stocks is the "pump and dump". What that means is that some folks make a really good living hyping up the next new hot stock and telling people how great it is going to be. Then after they have talked enough people into buying enough shares to move the price up, the people hyping it up sell all of their shares for a profit. The real kicker is that they usually hold a fairly significant amount of shares and cause a pretty sharp decline in the share price by selling their block. Most often, the penny stock does not ever recover and the folks who bought the hype get stuck holding the bag. So, beware of this strategy, it is rampant in the penny stock game. The other issue with penny stocks, which has already been touched on here, is that these are shares of companies that have not yet proven themselves, and that is why they are so cheap. A large percentage of penny stock companies do go bankrupt within a year or two, and of the ones that don't, most don't ever show long term profitability. Because of all of these challenges, the penny stock market is a very risky bet, and there are a lot more fortunes lost in it than there are made.
You might lose a little amount here, a little amount there... but at the end of the day it all comes down to how much you've invested, lost and gained. If you lost more than invested, then stop... you might easily reach the three digits mark in terms of lost profit. If it works out well for you, don't be overly-excited. You can lose everything as easily as you won.
I think investing in penny stocks is something akin to penny slot machines. Yes, your chance of a pay off is less when you are investing in these machines but also you are not risking much either. So consequently the risk to reward ratio may be something similar when you are talking about penny stocks. It can be an algorithim that might be similar in some respects.
Most penny stocks are stocks that have undergone mass depletion of their value. Penny stocks hardly ever rise up, and when they do, you would make HUGE profit - but they do not. That is just a fact - think about it, why has that stock become a penny stock? Because it fell out.
But again, penny stocks are there to be traded. Someone has to step forward to develop an optimized strategy for their trade. You can't make profits or losses all the time. You have to only balance the odds in favour of the probabilities to get profit. The best strategy is to make short trades. Only invest what you can afford to lose.
