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Penny Stocks set to explode

Penny stocks (in the US) is a “common” stock which typically trades for under $5 per share and is usually traded OTC or over-the-counter.  You can usually find out about penny stocks through a variety of stock quotation services (e.g. OTC Bulletin Board, Pink Sheets, etc.).  Despite the fact that these types of stocks are said to trade “thinly”, hundreds of millions of shares can be traded in a single day.  Unfortunately, these stocks are easily manipulated and extremely difficult to locate.

CONCERNS AND RISKS INVOLVED

The allure that many penny stocks have for investors stems from the fact that they can be purchased dirt cheap and have a huge potential for gain.  Unfortunately, there is still a potential for huge losses so there is still a considerable risk factor involved with these stocks.  Some of the key negatives are internet spam and the potential for fraud.  If you are contemplating investing in any penny stocks, you’ll want to avoid all those e-mails and by all means, investigate the company and the penny stock they are promoting heavily.

KEEPING AN EYE OUT FOR GOOD INVESTMENTS

Remember first and foremost that there is still considerable risk involved when trading penny stocks.  In other words, you’ll want to use about the same type of strategy for trading penny stocks as you would when purchasing lottery tickets.  Here are a few suggestions for finding the best penny stocks and investing in them:

Look at the Dow and NASDAQ daily – this is the first step that you should always take because you will be able to find the biggest gainers and/or the most active penny stocks.  Look for those characteristics in penny stocks that are in the $1 range. Note that usually these low-price stock do not belong to any large cap indexes.

Do your research – if you find a particular penny stock that is overly tempting, don’t just dive in without researching both the stock and the company that is offering it.  You would be amazed at the amount of fraudulent activity that occurs in the penny stock arena.

Find an online brokerage – these are considerably less expensive than dealing directly with a broker or brokerage firm.  Once you have found the right online brokerage, you should open an account and deposit your investment funds into that account.

Don’t put all your eggs in one basket – diversification is the key with penny stocks just at is with any other type of stock market investment.  Purchase several penny stocks if you can afford to do so.

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