[mage lang="" source="flickr"]why invest in penny stocks[/mage]
Penny Stocks are Bad For Long Term Investing BUT?
What about short term investing? I ask why penny stocks are so taboo, and people respond assuming I’m going to hold on to them long term.
But if I’m going to sell when it increases week(s)/month(s) later, what is there to lose besides the stock just going down and down in price which is the obvious risk with any stock
okay i’ll make it really straightforward
if i buy 3k shares @ .08 a share then sell at .14 how can i lose?
please tell me that
common sense, yes you’re right, something is at .08 an goes to .01 that would be bad, obviously
but if it goes up as i described, and i sell it, HOW CAN I LOSE?
that is what i want to know because everyone seems to say that penny stocks are automatic losses, which i can understand if they’re talking long term but i’m not.
i have seen many graphs that do what i just described, down to 8¢ up to 14¢ etc, if someone bought it at 8 then sold at 14 what did they lose??
You have to be careful with these small companies. Yes, a price of a stock can fluctuate, but it doesn’t guarantee that price when you go to sell. Basically, the price a stock is at the moment is the last trade that occured whether that be 1 share or 10000000 shares. So the problem lies in whether people will be interested in buying off your shares at 14 cents. That’s why people should buy stocks with limits set. Because if you buy and put the option as at market, that price then depends on whoever made an offer to sell at any price really. The problem with small companies/penny stocks is that there is unreliable demand for the shares. Sometimes, shares don’t trade for weeks because no one is buying or selling. THis means you maybe tied to those shares for weeks or even months unless your willing to take a loss. Also, because of the large number of shares you are selling, there are often fees based on the number of shares you sell. This can easily eat into any profits you make. So, make sure you research the company, and make sure there is sufficient demand for when you sell. Look for numbers such as Average Volume. This tells you how many shares trade daily on average. This can help you determine the market for these shares. You’ll notice for many penny stocks, this is 0.
Also, if you can, look at what the company actually does. This may then become a lifetime opportunity, or a dead end.
Good luck. Make sure you understand how market pricing works so that your not ripped off.
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