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Make Money Trading Penny Stocks

The Benefits To Making An Investment In Penny Stocks

The Key To Low Penny Stocks The Potential in Low Penny Stocks

The benefit of making an investment in low penny stocks is not immediately clear to several investors. In reality many traders erroneously think that a cheap stock is inherently less capable of creating returns than a rather more costly large cap stock. These inexpensive stocks are actually more capable of making sizable returns than their more expensive counterparts. The trick to making them effective is in volume.

If you’d like low penny stocks to earn income for you, then you have to exploit their low-value and buy plenty of them. If a stock is only worth 10 cents per share, you can purchase 100,000 of them for just $10,000. That same amount would buy only a few large cap stocks, leaving you in a position to profit from huge changes in stock value.

Imagine what would occur if you sank all that money into low penny stocks. A single penny increase in value would net you $1,000 as you have so many shares of that one company. The same change in value in a huge cap stock would not make the commission fee worth the trade.

While these stocks have low initial value that just increases their potential. Some of the low priced stocks you can find these days have suffered significant setbacks thanks to the recent economic crisis. Nonetheless if you know anything about trading, you know that stocks have a way of coming back. Some major companies are now selling their stocks for less than a greenback. With the same framework and a better business plan, they are certain to come back and create heavy earnings for their investors.

The right way to Buy Low Penny Stocks

Sadly, you frequently can't find low penny stocks on the regular stock exchanges. The companies that issue these stocks do not meet all of the filing needs set by the SEC. If you want to buy stocks worth less than a dollar per share, you often have to have a look for them in the over the counter market (OTC).

When you purchase OTC stocks, you have got to be more careful than you do when you buy stocks listed on the NYSE. The SEC doesn't provide oversight for OTC stocks. You should buy low penny stocks from their holders rather than through a broker.

Henry Jones is a specialist in the stock market and writes stock market tips on his penny stock website.

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