Penny Stock Trading - The What, The Why And The How

What are "penny stocks"? What is penny stock trading all about? Well, a penny stock doesn't trade for mere pennies these days, although it might trade for less than $1 per share. Penny stock trading actually doesn't have an agreed-upon official definition, but many traders consider penny stocks to be those that trade for less than $5 per share. Others simply consider penny stock trading to involve buying and selling shares from companies that are being traded separately from the major stock exchanges.

There are some large corporations (in terms of market capitalization) that have their shares trade for less than $5 each, while there are also a lot of very small companies that have their stocks trade for $5 or more. Typically, though, penny stock trading means that you to trade the stocks of very small companies, and they are highly speculative and illiquid shares. The company will typically be subject to limited listing requirements as well as fewer standards of filing and regulation.

How To Profit in Penny Stock Trading

These are, as alluded to above, highly volatile stocks. This means they are very high risk, but as always in trading, higher risk equals higher potential rewards. It's possible for you to make 300% profit in less than an hour with penny stocks. Needless to say, that means you could also lose that much that quickly, too. Yet, the whole attraction of this market, besides the low prices for the shares, is the opportunity-engendering volatility.

What this means for you is that you will need to have plenty of research and experience under your belt to make it big with penny stocks. You certainly can make a lot of money on these stocks--if you know how. And since they are so volatile, it would mean that you would have to be a day trader--someone who constantly monitors the market all day long during open trading hours. It goes without saying that many people who want to start penny stock trading just don't have the time or opportunity for that, so that can really slow up progress.

But these days, there are penny stock trading robots. These are computer software programs that you set up with your preferred parameters and trading style, and then you simply allow the to monitor the market all day long without any breaks. They will trade whenever they get a trading signal, which is based entirely upon their programming plus the parameters that you set them up with. They will never miss an opportunity, plus they don't have any emotional interference when they make a "decision" to buy or sell. Have a look at whats out there if you want venture into trading penny stocks.

You also want to go through a reputable penny stock trading brokerage service. The best ones are generally considered to be TDAmeritrade, Scottrade, E*Trade, and ING's Sharebuilder.