Penny Stocks - Big Risks, Possible Big Rewards

One area that financial experts warn investors (with good reason) to stay away from are penny stocks.

Like futures and options, penny stocks are volatile, high risk instruments that cause many people who trade them to lose their principle.

However, like futures and options, penny stock markets do have a small number of players who consistently make money. I even read about a penny stock expert who became a hedge fund manager.

The secret to penny stock success is the same as that for any investment - treat it like a serious business. You need to be well-capitalized, have a well-developed trading strategy, patience, and a lot of good information and research.

Unlike mainstream investments like stocks and bonds, any penny stock traders lacking in these areas won't simply lag the market in returns - they will probably lose a substantial amount of principle. High risk instruments are unforgiving of amateur approaches.