Everyone loves a big success story where the savvy investor bet on a penny stock and made enormous gains that led them to a very healthy and early retirement.  Stories like that are the American Dream of making it big and hitting success.  However, for the large majority of penny stock investors, the feat of accomplishing a rock solid investment that pays off in spades is just that – a dream. 

Why Penny Stock Trading is So Risky

Any company trading for low amounts is thrown into the general basket that is a penny stock.  Normally, these companies trade as low as fractions of a penny, and as high as $2.00.  There aren’t any rules in terms of what exactly is a penny stock, and since they are volatile, they can often trade as high as $5 per share. 

Normally, companies that trade in this range have very small market capitalizations, a cloudy financial outlook that may or may not show profits, and you’ll often find them trading on the pink sheets and not on any of the major stock exchanges. 

It’s not that these companies don’t have any value, but their financial outlook is dark, at best.  However, many investors, which could be called gamblers, are out there dipping their toes in the dark waters of penny stock trading, looking for that diamond in the rough that could rocket up to become a stock worth several dollars per share. 

The Potential Rewards With Penny Stock Trading

While the odds are against investors making money with penny stocks in the long haul, the fact that the volatility of penny stocks is quite high opens them up for potential huge profits if the trade is executed when buying low and selling much higher.  Many stocks that trade in these gaps can be a low price of $.25 one day, and be up to $1.50 within a short matter of time.  Many people think of the potential quick upside that can happen with these stocks, but fail to realize, that what goes up can often come tumbling back down as well.  There is a lot of assumed manipulation as well in the penny stock market, and even the best penny stocks to buy in 2020 may not be around before 2021 even comes around.  Quick, opportunistic swing traders do well with penny stocks, and it’s a hard game to play if you hold on too long. 

Since the penny stock market will never go away, neither will the massive amounts of stock promoters on social media, on online forums, and even on investment newsletter services. For this reason, there will always be a curiosity about big gains to be made with penny stocks.  When there is a dream to chase, investors certainly will throw time and money at it in hopes of the next big score.