Buy Penny Stocks - The All You Need-To-Know Guide

If you are looking to buy penny stocks, you are surely not alone. Google research alone proves that many, many more everyday people look up buying penny stocks than they do Blue Chips or other macro caps.

What is the great attraction? Why do so many people want to buy penny stocks? For one thing, they are affordable to average people, because while they don't really trade for "pennies", they can and do often trade for under $1 a share. The unofficial consensus among many investors is that a penny stock is one that trades for under $5. But penny stocks are also those that are not traded on the major stock exchanges (usually). So even though some major corporations can have their stocks trading for under $5 a share, the usual exchanges such as the New York Stock Exchange or Chicago Mercantile Exchange are not places to for buying penny stocks.

It is therefore understandable that the SEC warns those who want to buy penny stocks "Investors in penny stocks should be prepared for the possibility that they may lose their whole investment." This is absolutely true. Penny stocks are so unregulated, so speculative, that the risk of total loss is all too real.

Now, this does not mean that if you buy penny stocks, you don't have huge potential for profits. You most certainly do. And, there is another reason why everyday people love penny stocks: these are sold by companies run by "one of their own". These are people who are trying to realize their dreams of forging their own destiny and running their own business. Who doesn't want to help them out? But the problem that you face is that the penny stock market is volatile beyond most investors' wildest dreams. You could make 400% profit this hour and lose 500% the very next. And, this is largely because penny stocks' price movements often have nothing to do with the companies that sell them. Lack of liquidity along with the lack of filing regulations--which interferes with transparency--makes it dangerous to buy penny stocks.

Tips For Maximizing Profits While Minimizing Risks Of Buying Penny Stocks

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

* Do not fail to do fundamental research into the companies you choose to invest in. You want sound companies, not those that you "hope" will make it. Of course there is always some measure of pure hope in any investment, but you won't want to abandon fundamental analysis like the banks did in the mortgage lending industry, now do you?

* Consider buying a penny stock trading robot, a software program to help you make accurate and disciplined trading decisions.

If you are looking to buy penny stocks, you are looking into an exciting world. But you must do your due diligence --dont be impulsive.