Quote:
Originally posted by bobmsmythe
Well, do you want a nice answer, or a good answer?
Nice answer: It's possible that you'll make some money, and you don't have that much to lose.
Good answer: Penny stocks are a fool's game. You're better off going to Vegas. You say you can't afford to get into IBM, but look at it like this:
IBM shares look to open at 99.55 this morning. Call it 100. You could buy 20 shares. If the price jumps by 10% this year, you'll have made $10 * 20 shares = $200 (minus comissions).
SHIT.ob is trading at .01. So, you can buy 200,000 shares, right? You're a big player, right? Really, though, what you need to look at is the percentage move. A 10% move-- to .011-- still makes you the same $200. And, realistically, SHIT.ob is a *lot* more likely to go out of business. Really, you're betting on a company that doesn't have many prospects and hoping that God smiles on it. It's not that hard to get listed OTC, pretty much any company that can't qualify is garbage or in the shitter. Finally, one last piece of information:
The volumes.
What do I mean? So say you want to buy 200,000 shares of SHIT.ob, as I said above. In all likelihood, that's going to *move* the market-- that's a huge load of demand. So instead of trading at .01, the market is going to push up. Say to .012. So now you're paying a 20% premium. And, once your order is filled, that demand is gone, so the price falls back to .01. You've lost 20% already. Now, you get tired of waiting, and you want to sell. Say the price is .011. Same thing happens on the way out-- you drive the price down by .002, to .009. So you've lost .003 total. On your 200,000 shares, that's $600, almost a third of your initial investment. Do you see why this is a problem?
For the amount of money you're talking about, you're extremely unlikely to make a lot of money moving in and out of the marketplace. As described above, you're going to be burning money on commissions. If you get charged $29CDN each way, that's a total of $58 to get in and out. So, assuming you put *all* your money in a single stock, you automatically are *down* almost 3% before you even do anything. So, maybe you're doing great, I don't know. But I'd want to find something more stable to invest in. FWIW, the commissions on junk stocks are generally the same as real stocks.
I've got to run now, market's about to open
Bob
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I do appreciate your honesty, and I would expect nothing but honest answers - no matter how brutal they are.
What I've been doing untill now is dealing with penny stocks in small volumes of 10,000 share lots. This limits my investment to a small amount and I am watching the trends on these charts to see how they are moving via daily highs/lows. basically i'm trying to find sufficiently volatile stocks that are swinging about $0.02 cents in a week or two period and then selling for the quick profit. 10,000 x $0.02 is $200 - $58 commisions is a profit of $142.
I know I could make the same type of money on IBM on a long term basis, but I don't have the patience to be in a stock for the long term. I want to swing and profit take when I can which is hard with such small funds.
Any advice for me? I know I am playing a dangerous game, and I've won some and lost some. My biggest problem is as you said volume. When I want to sell there isnt always buyers, and when I want to buy, an order can take a day or two to fill, and then sometimes i'm forced to chase the stock which is a dangerous game.
I know as a broker you probably think I'm an idiot, but basically I want to make money in the market, and if I want to wait out for the long term I'm using mutual funds (thats where i Have the bulk of my money).