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by: ChrisBraff
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By far, the biggest advantage of penny stock trading is the unbelievable leverage that it gives traders. This is the main reason why its absolutely perfect for new and inexperience traders of the stock market.

Most so-called experts of the stock market always tell traders to buy the blue chips stocks and build a portfolio. They tell you to buy stocks like Wal-Mart, Exxon, etc... The problem with that is that most new traders to the market don't have a $100,000 to invest and build a portfolio full of Microsofts.

Being that most new traders are strapped for money, let's say they open their account with $3000. How far do you think that $2000.00 is going to stretch when investing in these kind of blue-chip companies? Not very far. They probably wouldn't even be able to buy 100 shares of one of these companies.

Now, take a look and see how far that money would stretch if the trader just traded penny stocks. They would be able to buy 7500 shares of 25 cent stock. They could even take that money and invest it in an all-penny stock portfolio.

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.

Do you really think you're going to get an amazing return on investment from a company like Dell? I wouldn't expect to.

Companies like these have already grown to be market leaders. They aren't exactly hidden gems. Their market value is already in to the price of the stock. It's the kind of stocks that people are lucky to get 10% return a year.

But with penny stocks, the sky is the limit. There have been penny stocks that have gone up as much as 500% in a day. It's not that uncommon for a small unknown to explode onto the market scene.

About the Author

Chris Braff has become extremely successful trading penny stocks. He found software which tells you where to find penny stocks that have the highest percentage of going up in value.

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