It Seems Incredible That You Can Purchase Penny Stocks Cheap and Make Money

The problem you face as a new investor trying to purchase cheap penny stocks is the same as any investor, large or small. Which stocks to buy? Trading penny stocks cheap is very much like trading any stock on the major stock market. You have to examine the fundamental and technical components of the stock just like any other company.

Although not without risk, cheap penny stocks that are fundamentally sound are going to involve less risk than just picking stocks at random. Some of the largest stocks on the Dow once were penny stocks. These stocks today cannot offer the same potential for growth and profit that a sound penny stock will have.

Penny stocks can be very high risk and volatile investments. In fact, 90% of inexperienced "day traders" will usually lose about 90% of their investment at least 90% of the time.

However, by selecting fundamentally sound small companies with great reports, a solid product and good management team, that have hit the bottom of their 52 week trading cycle, you can minimize your risk and maximize your profits.

You must be prepared to be patient. The average time to hole the stock can be from a week to over a year. A lot of stocks will show a profit in 2 to 10 weeks but you may have to commit to at least a 6 month holding period to show some success. This is crucial. You may find some quick profit opportunities but the savy investor is prepared to wait for a 6 month or longer period to make better profits.

The U.S. Securities and Exchange Commission (SEC) requires your broker to give you a document describing your risks and obtain your signature showing you are aware of the risks in investing in penny stocks. You should read and understand it carefully before you sign it.

In addition to obtaining your signature, the SEC requires your broker to wait at least two business days after sending you this statement before executing your first trade to give you time to carefully consider your trade.

Penny stocks can be very risky.

Penny stocks are low-priced shares of small companies. Penny stocks may trade infrequently which means that it may be difficult to sell penny stock shares once you have them. Because it may also be difficult to find quotations for penny stocks, they may be impossible to accurately price. Investors in penny stock should be prepared for the possibility that they may lose their whole investment.

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