What's The Allure Of Trading Sub-Penny Stock?

You may be a new investor, but it could be hard to get excited about shares that sell for a fraction of a penny, or even those that trade for $1 per share. A sub-penny stock still holds appeal for a certain investor and it seems these speculative shares never lose their allure for beginning investors. There are some people that believe they are too risky, but they are a small investment, should they skyrocket in price.

The Upside Allure Overshadows The Financial Loss

If you listen to the consistently-profitable investors that pick legitimate "up-and-coming" companies, it's possible you have little chance of recovering your money, should shares take a downward turn. Others think that a bottom will be hit and if they hold on, they may earn profit on their shares. If a drastic increase takes place, it could be best to view sub-penny stocks as a short-term investment. That means take your profit and don't get too greedy. It's possibly the target of a hyped-up publicity scheme to increase the value of a shareholder that writes a popular newsletter, for example.

A sub-penny stock can be quite risky, even though you can quickly double, triple or quadruple your money. Don't forget to consider fees and commissions, because they can eat up profits, since you have to pay fees on the front end, when purchasing and again, when selling your shares.

Trends Are Difficult To Discern, But You Can Find High Volume Trading

Even if you use a discount broker account to trade a sub penny stock, it's possible you will find little information and since they are traded on the OTCBB or pink sheets, there is less monitoring and scrutinizing done on fundamentals. You can always consider stock-picking software to help you, but trends can be difficult to spot in this volatile market. You should look for the highest volume trading, if you hope to see appreciation and quickly liquidate your shares, before they become worthless.

Beginners Can Afford Them

Since a sub penny stock is so affordable, there are many investors that start trading in the stock market this way. They assume they have little to lose, when compared to the larger-cost shares. The main thing to think about is you can lose all of your investment and these shares can take a considerable amount of time to re-trace their losses. Unless you are in the early stages of a major product development, it can be difficult to make a meaningful profit.

They Are Part Of The Learning Process

If you have done some research, purchased eBooks about trading sub penny stock or those under $1 per share, you may have a better chance. There are charting tools on the financial stock trading websites and some people are able to learn more about the market, using these affordable shares as a training ground. The main problem is that low volume trades and little public information can make it difficult to make a knowledgeable decision. You can subscribe to paid newsletters by unbiased stock trading experts, but you can also learn by using a sub penny stock to see how the process works and gradually work your way up to more expensive shares that have better odds of becoming a sound investment.