Should you buy penny stocks?

[shulink]

What are penny stocks?

Penny stocks are stocks trading under $2 with low volume and a low market capitalization.

Are penny stocks profitable?

Penny stocks are extremely profitable if you trade it on the right direction. For example, it is hard for companies like Microsoft to go up over 5% in a single trading day. On the other hand, a penny stock can easily go up 10%, 20%, 50%, even over 100% in a single trading day.

Are penny stocks risky?

While penny stocks are profitable, it is extremely risky at the same time. Traders refer to it as the high risk – high reward in stock trading. A stock can go up over 100%, but at the same time, it can go down over 50% or even 100% in a single day. Most of the penny stock companies are small companies and may go out of business at any minute. They are cheap for a reason. In addition, the cost to trade penny stocks are higher because they very illiquid and the slippage fee are more expensive for those stocks. Sometimes, a buyer cannot find a seller and the stock price must go down in order to get a seller. Unlike blue chip companies like J.P. Morgan or Microsoft where there are always buyers and sellers at any second.

Should you buy penny stocks?

If you a beginner, I wouldn’t recommend trading penny stocks. If you are a regular trader and decide to take a shot at penny stocks, I wouldn’t recommend you trade more than 10% of your money. Personally, I rarely trade penny stocks with over 10% of my money in my trading account.

Does technical analysis apply for penny stocks?

I don’t think you can apply technical analysis to penny stocks because their price is so unpredictable. However, it is always good to know the support and resistance of the penny stock before you trade it.

[nightwing4]

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