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Leverage and Trading Penny Stocks

Jul 24, 2008
The single best perk to trading the penny stock market is the amazing leverage that it provides traders. That's why there is nothing more perfect trade for new or beginner stock market traders.

Many of the stock analysts always tell new traders to invest their money in well known dependable companies. They tell you to invest in companies like Wal-Mart or Chevron. It's a great idea but unfortunately most new traders don't have $50,000 to invest in a portfolio of these kind of stocks.

To give you an example, lets say that a new trader wants to put in $3,000 into the market. Do you really think they would be able to build much of a portfolio investing in the companies that most analysts recommend? Probably not. They'll be lucky to buy 100 shares of just one of those stocks.

But what if we used that same example for a person just trading penny stocks. Think ho much of a difference that would be. They could buy 4500 shares of 75 cent stock or even better build an entire portfolio of just penny stocks. The trader has diversification at a much lower cost.

This is just part one of the great leverage that penny stocks. Not only are you getting more bang for your buck, but you are also able to have a much better risk to reward ratio than trading the big boys.

What kind of return could you possibly expect to get from stocks like Target or Microsoft? It won't be a whole lot more.

Companies like this already enjoyed their growth spurt. They are full grown companies now. These are the kind of the stocks that people hope to get a steady return of 10% a year, if they are lucky.

But when you're talking about penny stocks, there is no denying how much growth potential they have. Certain penny stocks have gone up as much as 500% a day.
About the Author
Chris Braff has become extremely successful trading penny stocks. He found software which shows you where to find penny stocks that have the highest percentage of increasing in value.
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