Penny Stock Investor - Are You Ready To Become One?

For novice penny stock investors, the best advice you will ever hear in investing is to educate yourself about these non-marketable securities. If you think that trading and investing in mainstream stocks listed on the national stock markets and the Big Boards are risky endeavors especially given the global recession, then triple the risks for penny shares. So, educate yourself today starting with this article.

Penny stocks, which are known by other interchangeable terms like microcap shares and nano shares, can be any shares of a for-profit business organization falling under the following criteria. Thus, you can consider yourself a penny stock investor while others may not share your opinion depending on the criterion chosen.

• Shares that trade for less than a dollar per share on the market (Other definitions put the value at $5 per share but we chose the most conservative figure, which is in keeping with financial matters)
• Shares issued by companies with capitalization of US$50 million and under. (Thus, the term microcap shares since this amount is considered small by international standards)
• Shares traded over the OTC-Bulletin Board and the Pink Sheets although Big Boards like the Nasdaq SmallCap Market and the AMEX also provide for trades in penny shares.

As a penny stock investor, your main approach is to always be extremely careful and cautious about the companies and their stocks. Fraudulent scams and schemes are all too common in nano shares for many reasons. Seasoned investors and traders will tell newbies that microcap shares are most often the subject of pump-and-dump schemes, chop scams and short-and-distort plans, all of which are designed to lure gullible investors ultimately parting with their money.

But don't let all these bad news discourage you from becoming an ultra-successful penny stock investor either. In every moneymaking scheme, the risks exist to offset the rewards. Even supposedly safe investments like savings accounts in established banks can be lost with the unexpected bankruptcy of the financial institution.

The trick is in always being aware of the high risks involved with investing and trading in penny shares. If you have the skills, tools and technologies to choose the most profitable microcap shares, then you are most likely to triumph over the risks and enjoy the rewards of profits.

You have already heard of fundamental and technical analyses used in the determination of the profitability for microcap shares. Such tools are covered in other articles so we shall focus our attention to penny stock newsletters, which are one of the useful resources for technical analysis because of the updated news on events that affect the stock market.

But it is not just relevant news that can be found in penny stock newsletters. You can also get hot stock picks from the financial gurus and other successful traders. You will then be able to whittle down your list of the possible companies worth investing in at the present.

But of course, as a prudent penny stock investor, you must still do your own research into the hot stock picks in the newsletter. You don't want to become a victim of a pump and dump scheme, do you?