Penny stocks are some of the most profitable and exciting stocks to trade. However despite the excitement and potential profitability of these companies, most penny stocks remain largely unknown. People write me all the time wanting to know what penny stocks are really all about. Hopefully I can shine some light on the subject for you.

I first discovered penny stocks a few years ago. I had been a successful trader of large cap NYSE and NASDAQ stocks but had never dabbled in penny stocks before. Penny stocks typically trade on smaller exchanges than the New York Stock Exchange. Most often, penny stocks trade on the OTCBB (over the counter bulletin board) or pink sheet exchanges. Sometimes they also trade on the NASDAQ or AMEX. The main difference between penny stocks and the larger stocks is the volatility.

Volatility may sound like a nasty world, but experienced traders know that volatility is always a trader’s best friend. After all, you can’t make money on a stock that isn’t moving. While a larger stock may make movements of 1% to maybe 10% on a wild day, penny stocks make much larger moves. Penny stocks can easily move 10-50% in one day. I’ve seen instances of penny stocks making gains as large as 1000%-2000% in a single day.

There is one and only one key to trading penny stocks successfully. Timing. It all comes down to timing. Knowing when to get in, and just as importantly…when to get out.

You’ve got to tune in to the underground penny stock community and listen to what they are saying. There are chat rooms, message boards, and newsletters.

When I first started trading penny stocks I was totally clueless. It was very challenging and I almost gave up, until I started religiously following penny stock newsletters. They send out news and penny stock picks. What I liked about the newsletters more than just going into chat rooms, was that newsletters really seemed to deliver in the most important area…timing. They seem to get the timing just right. A lot of the time penny stocks make massive moves as soon as a newsletter covers it.

Penny stocks can be played long term too, and aren’t just for traders looking to cash in short term gains. Most of the newsletters I’ve followed send out both long term and short term picks for penny stocks

I’ve seen a lot of success with penny stocks. The stories you hear of people turning $1,000 into $1,000,000 can be true. The key is to get the timing right. My suggestion? Start following a newsletter and learn about penny stocks for yourself.

There are a few good ones out there that I like, but I’ve found this one http://www.pennystockalerts.com to be the most reliable for sending out winning picks. Penny stocks are definitely the wild west of the stock market, so good luck out there and trade carefully!