Pros and Cons of penny stock trade

Penny stock trade might be tricky, so should you invest in penny stocks? Don’t decide just yet, learn about the advantages and disadvantages of the penny stock trade before you are jumping into the deep water.

Pros of penny stock trade:

– Buy and Hold can get enormous rewards if the right company is bought and held until it has had time to grow. It is not easy to predict which penny stock company is likely to perform phenomenally also because financial reporting is not very vast. Traders who guess successfully can make a lot of money when the stock they bought for pennies worth now dollars.

– Maybe the most attractive aspect of penny stock trade is that small moves can provide very high gains. Penny stocks come (By default) with a very low stock price of entry.
It is very common to stumble upon penny stocks which trade for no less than 25 or 50 cents. For example, when a 20 cent stock gains 5 cents in its stock value, the investment would have increased by 25% for the investor. However, the trader must not forget that it goes both ways, and the big change can go also downwards.

cons of penny stock trade:

– One major con is penny stock price manipulation. Because the liquidity is small and big buys can greatly affect the price, there is a chance that someone will buy the stock, that try to convince others to buy it (using publication of analysis of the stock for example), because the stock is volatile, it will rise greatly, then the investor will sell the stock with great profit on his side, the other investors will suffer from this scheme, also known as “pump and dump”.
This can happen in other stocks also, but it is more likely to happen in a penny stocks trade .

–  Penny stock is traded in a few different ways, it can be part on the big exchanges such like NYSE or Nasdaq, and it can be traded in the OTC (over the counter) markets or in pink sheet form. Most of the penny stocks are not listed on the big exchange markets, and that is why they are less regulated (not regulated by the SEC – the Securities & Exchange Commission). That is why penny stock traders can suffer from a lack of information. On the other hand, there is also a big opportunity here, since penny stocks are more likely to fly under the radar, this makes your chance of finding a cheap winning stock bigger.


What’s next?

1.Investment strategy

You must have a clear solid value strategy that will help you find the good stock from the bad ones. Learn now!

2.When should I buy/sell?

After picking the right stock we will use The Technical analysis Investment method to decide when is it a good time to buy and when to sell.

Learn now!