Penny Stocks Risk and Reward

Penny stocks are considered higher risk, because uninformed or unlucky investors have lost money, and quickly.

Sometimes those losses are contained to a fraction of the invested capital, but other times traders lose 100% of their investment (for example, if the company goes bankrupt). Companies ceasing operations, running out of money, and / or closing their doors is much more common among penny stocks than other larger investments.

That is why it is so important to limit your risk, and avoid the common pitfalls that so many investors blindly fall into. Understanding Penny Stocks will help you limit your risk significantly.