While penny stocks used to be a penny, nowadays you’d be lucky to find any stock for a penny. While Penny stocks have been around for a long time, they became very popular in the late 90′s when the dot com boom took over Wall Street and made a lot of young traders very wealthy overnight.
This “dot com” phenomenon was described by some investors as the Penny Express. Everybody jumped on to this train – heading for massive wealth. A lot of money was made at either end of these penny stock trades. The aspiring entrepreneurs turned to the OTCBB to get the venture capital and to help them get their ideas and products off the ground and to realise their dreams.
Often they would list their companies for as little as 10 cents a stocks – only to wake up and find them to be ten dollars a stock overnight. These are the kinds of returns that most traders only dream about.
This penny stock phenomenon propelled a lot of entrepreneurs into massive wealth. Even old fashioned traders got on the bandwagon. While most of them would normally shy away from penny stocks, they now jumped unto it with open arms, embracing it as the biggest opportunity in decades. Unfortunately the whole dot com boom came to a sad end as many market experts predicted and by 2002 more than 50% of them were wiped out.
Even though some companies survived, most were wiped out. The one good thing that was left over was a renewed interest in penny stocks. Traditionally penny stocks is a way for aspiring companies to get on the map and to find the capital to bring their ideas to life.
When all goes well, penny stocks can turn into blue chip stocks and become very valuable companies. When it all goes bad, the stocks become worthless and the company disappears faster than then it appeared. When investing in penny stocks the secret is to know the risk and to hedge against potential losses. Even though you can make huge gains that you will never make on the major exchanges, the risk is there and something you need to be very careful of.
Yes, with penny stocks, there is great risk, but the reward is a massive incentive to learn how to trade penny stocks well. They can give the “small guy” massive le average when trading and without spending your life savings you can make some decent returns. The key thing is to know what you are doing and to apply basic trading principle without getting swept away with greed and the blinding promise of 1000% returns.
To learn more about trading penny stocks and how to find the best penny stocks, www.bestpennystocks.weebly.com for more information and some great tips to help you succeed.
June 30, 2009 at 1:52 am |
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