Trading penny stocks can be a very stressful experience if you are not a professional trader. Penny stocks, aptly named because they cost less than $1 per share, are extremely volatile. While there are many people who have made a lot of money off of penny stocks, to the average folk, trading penny stocks looks like a craps shoot. They are unable to predict in which direction these penny stock companies are headed and they are more likely to lose money than to make money. This is, of course, because of the cost of commission and other brokerage fees added into the mix.
There is no clear-cut strategy for buying and selling penny stocks that works for everyone. Buying and selling penny stocks necessitates both fundamental and technical analysis methods. Fundamental techniques are strong because if the company is truly strong, they will not remain as penny stocks for long. A fundamentally strong company will soon be worth several dollars per share. Technical analysis methods and Forex Arbitrage work because you want to make sure that other traders are looking at the data the same way. Because technical analysts look at past data to construct future hypotheses, the past price data is oftentimes a self-fulfilling prophecy. If it has worked in the past, it can work again in the future.
If you are truly interested in trading penny stocks, make sure you do your research. And remember, penny stocks are not able to legally be sold short. This means that you must trade only long positions with penny stocks. There is a lot of opportunity here, but you need to be prepared in order to capitalize on it.