Day Trading Penny Stocks

Penny stock investing is considered a high risk because companies that sell speculative securities are not subject to the same regulations as companies who are listed on a major exchange. Speculative securities are mainly listed on Pink Sheets. The Pink Sheets are largely for companies who have financial difficulties and do not use an outside auditing company to scrutinize financial statements. Because a company does not have to prove financial health it is much easier for the numbers on financial statements to be bogus. Speculative securities are priced based upon the market as a whole which means that the price is not a true representation of a company's value.The downsize to trading the same shares on the same day is that prices do not fluctuate much in one day's time so making a sizeable profit is unlikely.

The stock market is a place where buyers and seller converge and make exchanges. These exchanges are called stocks or shares. Before an individual begins day trading penny stocks he or she needs to understand how the market works. Shares represent ownership in a company. Companies become public so that they can sell shares in the hopes of expanding and experiencing growth. The main influences on stock prices include the economy, oil prices, inflation, supply and demand, fear, and the news. In addition, earnings, growth, and layoffs can affect prices.


In other words, seeing an increase of five cents to ten cents is easier than an increase of one hundred to two hundred dollars. Investors need to have sound methods on how to evaluate companies that are listed on Pink Sheets to minimize the risk and maximize the success of investments. One way to minimize the risk is to use a broker who knows the market well and understands how to invest in speculative securities.


Developing a strategy is important with speculative stocks. A smart individual will do all the research possible beforehand so that his or her chance of experiencing gains is possible. While no one wants to experience losses it does happen sometimes. Subscribing to a reputable newsletter will provide some insight into penny stock investing. A wise investor will pay attention to warning signs such as layoffs and store closings and be cautious when purchasing shares with a company who may be in trouble. Using a technical analysis may help predict a stock's price in the short term. An individual who decides to invest in the market should do so while using wisdom. God's word emphasizes the importance of being faithful with what is given and being a good steward in every area including finances. "A faithful man shall abound with blessings: but he that maketh haste to be rich shall not be innocent" (Proverbs 28:20).

Online trading provides some benefits that can help a person to decide how to excel at penny stock investing. Some sites on the Internet provide benefits to those who choose to join their site as a member. Membership benefits often include helpful tips and low-risk strategies on how to be a successful investor. In addition, the benefits include hot picks that are recommended and analytical commentaries along with other perks. Of course there are usually membership fees to join which would be over and above any brokerage fees.

Understanding the risks is important with any type of stock investment. However, day trading penny stocks is usually more risky than trading shares listed with major markets. The attractive thing about speculative securities is that it is possible to purchase small and trade for a little bit more to realize a profit. The main thing for a person to remember is that he or she should not purchase more shares than can be reasonably afforded. Money for necessities to live should not be used to gamble with. An individual who gambles with money for necessities will suffer much more when losses occur than someone who is using extra money that will not be needed for current or future necessities.

For more secure investments a person may want to consider purchasing bonds or certificates of deposit. Though the return may be low it is sure and secure. There are many who claim that penny stock investing can be a sure deal; but there is no guarantee of a profit and there is always the possibility of a loss. In addition, if the situation is really bad a person might not be able to sell his or her shares at all. A person should use some wisdom when turning to the stock market and should not sink everything into one thing but instead should participate in different types of investments to minimize losses and increase gains.