The Facts That Make It Risky
There are certain established facts that make penny stocks inherently risky. Some of them are:
- Penny stocks have limited market capitalization. The total market value is around $100 million. Limited market capitalization denotes that you will get minimal chances to profit.
- These stocks have low price as below as $5 in U.S. trade boards.
- Unscrupulous stock manipulation is hugely practiced in the penny stock market. The ‘pump and dump’ and ‘short and distort’ are the popular ones. This practice makes the stocks a risky affair by nature.
- Most of the penny stocks do not get listed on the major stock exchanges like; NYSE or NASDAQ.
The Guidelines To Minimize The Risks
- You can significantly minimize the risks associated with penny stocks by using stop-limit orders.
- You can size up position relative to normal volume. You can easily limit the downside risk and lock your profits with this method.
- You can take reference from penny stock website analysis for an effective trading out of your small investment.
You should look for a website that offers you easy guidance and expert suggestion of stocks. The news and suggestions must be updated on a daily basis. You can also look for a personalized email alert option for daily picks and analysis.
For small investors Penny Stocks are like a treasure island. You can purchase 2000 shares of a stock with $0.002/share. Imagine the possibilities of earning an average profit through penny stock with its low price rates. The stocks are profitable yet risky so you need to be careful. You should have the right sense of timing in picking up the right one. A website analysis will help you immensely in your stock market pursuit. The penny stocks are highly volatile. The fast they move up, the fast they move down. You must take your time in your trading with these stocks.
