There are many people that would like to invest money by trading on the large stock markets like the NASDAQ and NYSE however they do not because they do not have enough funds to start investing in such a big way. In order to start investing by trading anyway, some of these people opt to trade in penny stocks instead as that can be started with as little as $50. Penny stocks are shares in companies which are too small to be listed on the large stock markets, perhaps with a value below $50 million. The price of the shares for these small companies is obviously low, usually less than $5 and often only pennies which is where the term penny stocks emerged. Just because these shares may cost less, it does not mean that their price is not just as volatile as the larger shares traded on the larger stock markets as they are.
In many cases these small value shares are more volatile than the more expensive shares and a share worth only 8 cents now could soon be worth $8. This means that there certainly can be money to be made trading in penny stocks however, as the prices can drop just as suddenly, losses can also be made. Of all the people that invest in penny stocks, it is estimated that only 10% of them make a profit and so penny trading is a very risky enterprise. As with any high risk venture though, the profits from penny stock trading can be high and some people have become what are known as penny stock millionaires but they are few and far between. Professional traders in the main stock markets often consider penny stock trading as more of a gamble than an investment and the reason for this is that the small companies that sell penny stocks are not bound by the same rules as the larger companies that trade on the large stock markets. The reason why they aren’t, is because the SEC (Securities and Exchange Commission) regulate trading on the large stock markets but not on penny stock trading.
To comply with SEC regulations, a company trading its shares on the main stock markets must provide information about their company, for potential investors to see. As the small companies do not have to do this, few do and so penny stock investors often do not know anything about a company whose shares they may be buying. You can learn more about trading in penny stocks at http://www.moneysoldiers.com/how-to-buy-penny-stocks-the-basics/ but basically the bottom line is that although you can make profits, sometimes even high profits from investing in penny stocks, if you are going to start you had better be prepared to lose your money just like 90% of the other penny traders do. For just as little as $50 though, penny trading will give you an idea as to what it would be like investing in the larger stock markets where higher priced shares are traded.