Day trading penny stocks can be a very exiting and very profitable way of making money in the stock market. This is because of the high volatility of these stocks. Unlike traditional blue chip stocks which are lucky to get a 10% gain over the course of a year, it is not unusual for penny stocks to double or even triple over the course of one or two days.

The flip side to that volatility is that they can also go down very sharply and quickly, this is why you should never put more in than you are willing to lose. Losses can be minimized to a certain extent with the use of stop orders.I learned this lesson the hard way when I failed to place a stop on my first trade with a penny stock and lost 60% of my investment.

A warning though, never forget that you are trading these stocks, not investing in them. If you have any thoughts of buying a stock for.01 cent and watching it soar to $20, forget it. The thing to remember is that 99.9% of these companies are worthless, that’s why they’re so cheap. That being said, as long as you are smart, not afraid of a little risk, and most importantly don’t get too greedy, you can make a lot of money day trading penny stocks.

If you are new to trading take your time, learn as much as you can before putting real money into it. I would suggest paper trading for at least a month or two once you think you are ready. Paper trading isn’t always accurate but it can give you some idea of how well you understand everything.

Is it possible for people to really make a substantial profit using Penny Stocks, even to become millionaires? Certainly there are some people who make huge amounts of money with stocks, ordinary people who trade in their own time perhaps as a hobby rather than as a professional trader. It is very likely however that although they started on penny stocks they eventually moved up to other potentially more profitable stocks using larger sums of money once they felt they were more experienced, and had more money to spend. Of course the question then becomes how do you start making profits quickly in penny stocks with the least risk?

Before we answer that question, let us quickly define exactly what we mean by penny stocks. There are different precise definitions, but in general the phrase refers to low priced, highly speculative stocks which normally sell at less than $1 per share. They are very volatile and can rise and drop hundreds of percentage points in minutes, sometimes as much as 400%. This can of course be dangerous, but can also be extremely profitable if you know what you are doing.

Now that we know what penny stocks are, how can we quickly work out what to trade and when, to maximise our profits? Remember, normally only after we have made a number of trades using small low risk sums can we even think about making the kind of trades we need to make the big money quickly. In most cases traders simply have to put in the hours – and weeks and months and years – to become experienced in the market. Only after trading many times and analyzing the trends and results over a long period can a trader say he really understands trading stocks, and even then he will still lose on many trades.

However there are of course many shortcuts on offer. There are many “systems” available, ways to help you identify trends and profitable opportunities as they happen, but there are huge problems with most of them. The main problem is simply that any system still relies on analysing the historical trends, and this takes time and effort. However, there may be a new solution.

Two computer programmers have created a piece of software which performs scans of stocks looking for companies who are forming bullish trading patterns, ie their stocks are about to increase. This software records historical information constantly and learns more and more over time, and every week it outputs recommendations of stocks it thinks should be bought and sold. These recommendations are only made when the software is confident in the outcome, based on the huge amount of data it has analysed.

Of course, as with all stock trading, and particularly in the volatile penny trades market, not every decision will be correct, even the software cannot predict every possibility. But on average the software is reported to create gains of 105.28% per week, even accounting for the trade recommendations which do not work out. Could this be the key to making significant profits from penny trades without spending years as a trader? Apparently if someone had put $5000 on each of the recommended trades over 4 months last year they would have made $387,684 in profit.

Buying penny stocks is not a whole lot different than your average stock you can buy on the NYSE. Essentially the major difference is that a penny stock trade price is under $3 per share. Most often penny stocks are either companies that have just gone public, or a company that is struggling.

There are a few problems when trying to buy penny stocks. The first of which is that there is no guarantee that after you buy the stock that you will have someone to sell it to. Some stocks may look like a great buy but volume, or the amount of times the stock changes hands per day, has to be taken into consideration. If you buy a stock and then can’t sell it one of two things is going to happen. Your stock will either stay neutral at your buying price or someone else who owns some shares in that stock will sell it for less than current market value just to get rid of it. If that happens you lose money.

Another problem when you buy penny stocks is market volatility. Some stocks have heavy trading volumes and they can lose a higher percentage of their value very quickly. For instance if a stock is worth one dollar and a quick sell goes on, the stocks price could plummet by 10 or 20 cents very quickly. If this happens you could quickly lose 20 percent of your investment because you weren’t paying attention.

The best way to buy penny stocks, is much like buying any other stock, do your research. If you want to be a successful penny stock trader you have to pay 100% attention to what that stock is doing from the moment you buy it. Fortunes are made and lost in a matter of minutes when it comes buying penny stocks so choose wisely and hope for a little luck. More info on the topic can be found at Des Moines SEO..