If you think that Penny Stocks are a way to get rich quickly, I'm sorry to tell you that you're wrong. People can make a lot of money from penny stocks, but they can also lose everything they put into them. When you first start investing, the most important thing you can do is put money into your education.
Why Education and not stocks?
We don't recommend diving headfirst into the stock market because it's a good way to lose money. Before you put money into something, it's best to read, read, and read some more. The Internet is one of the best places to get free information about penny stocks and how to trade them.
You can learn a lot about how to invest in penny stocks from forums, websites, news sites, and eBooks. You can borrow some great books from libraries or buy them cheaply in stores.
Please be careful when reading about stock strategies and recommendations on the Internet. Recommendations and opinions about stocks from online forums can be biassed, so you can't fully trust them unless you do your own research. In the same way, eBooks with strategies that promise big profits usually don't work the way they say they will. Even if the strategy worked well for the author, it doesn't mean it will work for everyone else. This is because everyone is different, but you might learn something you didn't know before.
In the business section of Google News, you can find free, up-to-date news about stocks. Yahoo Finance also has a section for good news and offers free charts and information about companies.
No matter who gives you advice, whether it's a financial advisor or a friend, you should always do more research on your own. You should decide what to do based on facts, not on what you think.
You can try some "test trades" when you feel ready. You can write down your trades on paper, or you can use a website that lets you trade with "fake" money. Champion Investor (ChampInvest.com) is a great site for this because it automatically figures out how much money you've made or lost. Also, you will get GBP1,000 if you are the best performer of the month.
If you use a stock simulator, you won't lose any of your hard-earned money on a bad investment. Instead of losing money, you will learn not to do it again.
If you can make money with your "test trades" over and over again, you can move on to the real thing. Keep your investment strategy the same as when you were making profitable test trades, but use your own money through a stock broker instead of "fake" money.
So, to sum up, if you want to start investing in penny stocks, don't jump in head first without first educating yourself.
