Many people love the allure of penny stocks because these kinds of stocks can move 50% to 100% or higher in just a single trading day. In fact sometimes you’ll see penny stocks increase 1000% in a short period of time. It isn’t shocking for this to happen. Penny stocks are very volatile and when they move it can be fast. The direction can sometimes be down, so one must be very careful and never invest more than they are willing to lose.
You’ll never see this kind of movement with most mid caps and large caps that are trading on the NYSE and the NASDAQ. In fact, you won’t see stocks on those boards trading for under $5.00 most of the time. There are some, but most trade a lot higher.
So, WHY do penny stocks have so much more potential for profit than other stocks?
Penny stocks trade with a lot more volatility than other stocks which means they have more potential for upside. If you can identify the penny stocks that will make big moves north, you could have an amazing future in penny stock trading.
With penny stocks, there aren't anywhere near as many people analyzing them.
These companies are not required to file as many reports. Many people don’t even notice them in the market. But then when a big piece of news comes out, a penny stock can sometimes skyrocket on that news. The key is to buy the company before that kind of news even comes out.
It can be challenging to find these stocks but not impossible. There are stock screeners and penny stock newsletters that offer penny stock advice and do research on companies for you. It’s imperative however that you do your own research as well after receiving a tip.