The Possibilities of The Cheapest Penny Stocks

The cheapest penny stocksactually have the most potential of all possible investments. In a sense, they have nowhere to go but up. The potential in a stock that is worth only one cent is much higher than that of a stock that is already worth a dollar or a stock that is worth hundreds of dollars per share. It is inverse relationship between the present value and the future potential of the cheapest penny stocks that draws people into penny stock trading.

Consider a hypothetical stock that is worth only one penny. If you buy a million shares of that company, it will only cost you $10,000 to do so. Imagine that the same company receives a momentary bump in its price and suddenly trades for five cents. That is only a four cent per share increase. Such a rise in value is meaningless among large cap stocks. However, that means an increase of four hundred percent for this particular stock and a possible profit of $40,000 for you.

The problem with this scenario is that the same stock might go belly up just as easily and take your investment with it. The idea that there is nowhere to go but up is essentially faulty because penny stocks can disappear under the right conditions. The cheapest penny stocks are also the most dangerous because they are so close to the cellar.

Where to Find the Cheapest Penny Stocks

You can inform yourself about the cheapest penny stocks by subscribing to a penny stock list or a newsletter. However, you should be very careful about what you read there. Much of the information may be hype intended to get you involved in a pump and dump scam. Sometimes unethical traders will buy up a stock and get others to buy after they do. This briefly pumps up the price. Then the first trader sells everything for a profit and sends the price of the cheapest penny stocks crashing down.