| When most people think of investing they think of | | | | 3. Low Trading Fees - The cost of a trade is so low |
| buying shares in large companies like Microsoft or | | | | I wonder how the brokerage companies make any |
| Google. Shares in these companies cost from | | | | profits. There are so many discount brokers to |
| $30-$300 each. For less than the cost of one share | | | | choose from that charge less than $5/trade. Ten |
| of a big company you can own 1,000's of shares of | | | | years ago trades cost $50 and higher. |
| penny stocks. Reasons for trading these small | | | | 4. High Potential Profit - Very few stocks can move |
| companies include: | | | | as fast and by such a large percentage as thinly |
| 1. Low Cost - Small company shares tend to trade | | | | traded small companies. It is very common for these |
| for a few pennies to less than a penny. When | | | | companies to double in a matter of days but the |
| making trades on 1,000's of shares worth in total less | | | | downside is they also fall in value just as fast which is |
| than $50 you have the potential to double, triple, or | | | | why you need to have stop loss orders. |
| even higher returns in a few days or hours. Big | | | | 5. Stop Loss Orders - Since these tiny companies go |
| companies never have the potential to increase in | | | | up and down in price so fast it is very important to |
| value by such large percentages. | | | | have stop loss orders in the event of a sudden |
| 2. Few Trades - Since there are less owners of tiny | | | | decrease in value. Stop loss orders are preset sell |
| stocks the share value fluctuates greatly with a | | | | orders that activate a sale at a predetermined lower |
| relatively small number of shares traded. If you hold | | | | price which prevent you from having large losses |
| large quantities of these tiny companies you can | | | | while you let the winners ride higher. |
| virtually move the price yourself. This can also work | | | | Trading stocks for a living is a great way to become |
| as a negative since when buying the company share | | | | wealthy but when starting out you should seek |
| you should buy in small 1,000 share lots so you do | | | | professional penny stock picking advice. |
| not drive up the price before selling. | | | | |