Trading Penny Stocks With Leverage
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.
All of the stock experts tell the inexperience traders to put their money into blue-chip stocks and build a portfolio. They always recommend the same companies like Exxon or General Electric. It sounds like a great idea, but the problem is that most new traders don’t have that much money to put into the markets.
For example, let’s say that most new traders have $3,000 to invest in the stock market. If that trader took the advice of most analysts, how much of a portfolio do you think they are going to have? They’ll be lucky to have 100 shares of one of these companies, much less an entire portfolio.
Let’s use this same example and see how well it works if the trader just invested penny stocks. Think how far that money would stretch. They could buy 6000 shares of one 50 cent stock. He could even build an entire portfolio of penny stocks with that kind of money.
That’s the amazing thing about leverage. You’re able to get more shares of more stocks and your risk to reward ratio is so much better than if you traded the blue chip stocks.
What kind of return could you possibly expect to get from stocks like Target or Microsoft? It won’t be a whole lot more.
These are just the kind of companies that are fully grown. There is a cap to how much they can potentially grow from this point on. People invest in these kind of stocks and hope to get a return of 10% 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.
I know it may seem like penny stocks should be traded completely differently then you would the \"regular\" stocks. But that really isn\'t the case....
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