How to Play the Stock Market With Penny Stocks

People are often wondering how to play stock market? There are countless ways to trade it. For those that don't have 6 figure brokerage accounts, penny stocks are a great way to go. Not only does is it perfect for the beginner trader but they are a great leverage investment.

You'd be hard pressed to find another trading vehicle that offers this kind of leverage.

For example, if we traded one of your garden variety fortune 500 stocks, how much return potential can you expect to see? Not a whole lot. These are the kind of stocks that people like to make a steady 10-15% return on a yearly basis. This is nothing to sneeze at. But I wouldn't expect to get rich from it.

Lets say you had $4,000 and you invest in a $40 a stock this means you have 100 shares. With that 10% increase that would mean that the stock price at the end of the year is $44. Not bad, but not exactly earth-shattering.

With this same example, lets say you invested that $4000 in a small cap stock that was worth 50 cents a share. You'll end up 8000 shares.

Now with penny stocks, the growth potential is really infinite because it really doesn't take that much to move the price. Some have gone up as much as 500% in a single day. Let's just say from the previous example that the penny stock went up 100%, that would mean the price when from 50 cents to a dollar a share. You can really start to see how such small movements can provide big profits.