These small stocks may seem harmless, but when you buy too many you may find that they add up to quite a lot of money. Be careful to invest only small amounts of your stock market budget in the beginning. The penny stock market is technically outside of the NASDAQ’s regulation and the SEC warns that they are highly volatile and should be handled with care.

Penny stocks are for those of the gambling persuasion. These high-risk assets can yield extremely large turnovers in no time at all, only to lose their entire value the next day; although if you’re feeling lucky, you can try your hand at penny stocks and reap the benefits of over-the-counter trading without a broker as your go-between.

Penny stocks are traded on the OTC market, so do your homework before venturing out on your own. First of all, when approaching a company, there will usually be two bid prices and two ask prices.

Experts recommend that you shouldn’t invest more than 20% of your portfolio in penny stocks because of their unpredictable nature. They are the tiny yet feisty fighters of the stock world—sometimes they pull through and beat the odds, but other times they explode into a nightmare of losses. So, start small. Keep your penny stock investments low at first until you have seen how your picks perform.

Go with trusted opinions. And by trusted opinions we mean someone you really trust. You should also be able to trust yourself, so be educated. Watch the stock’s performance before buying, do your homework about the company, and cull the critiques of analysts without ulterior motives.

Be aware that penny stocks, because of their quick trading and fluid nature, may be inaccurately quoted to you by both companies and brokers. While it is certain that much technically criminal activity occurs in the penny stock market, much of it is difficult to catch and often goes unpunished, so it’s up to smart investors to protect themselves.

Penny stocks are nimble little stocks that make their moves quickly and can be bewildering to choose from. Rule number one: if you can’t afford to lose the money that you are investing in your penny stock of choice, then you should not be doing it. Speculation is best suited to those looking to grow their extra income. Do not use money you need.

The perfect investor would have a functioning crystal ball. As it is, even the best stock pickers in the market are always guessing to some degree. Keep that in mind as you attempt to pick your stocks, and remember to always start small and test the stock’s performance before you sink more money into it. This exercise may take only a couple of days in the penny stock market because of the incredible speed with which these small stocks are exchanged.

Penny stocks are usually marketed by newer companies, but “new” is a relative term. If the company you buy from is young, they will naturally be running their accounts at a loss for up to five years. More than that is excessive, though. And it is a smarter bet to buy from companies older than five years, simply to avoid problems frequently associated with starting up (one of these is total collapse and bankruptcy).

Once you have a general idea of what to do, you need to know exactly how to proceed when buying penny stocks online. First of all, choose a reliable website. It is not difficult to buy penny stocks online. Although not a technical necessity, brokers are commonly used and reputable firms will have well-done, easy-to-use websites.