Penny stocks are highly attractive to many investors.
This is because they are cheap to buy and open the doors for many people who could not invest in standard and more expensive stocks and shares.
But you can make a lot of mistakes if you're not careful.
The low price of penny stocks can make it more tempting to invest in one or more stocks without doing your research first.
Research is vitally important because you need to know whether you are investing in a good or bad quality company.
Penny stocks do not appear on the main stock exchange and the companies may well be less established as a result.
Don't risk investing in anything until you have done your homework on it first.
Watch your sources of information too.
There are lots of websites online that give out free tips and advice on which stocks to buy and which ones to sell.
Always ask yourself why another person should recommend something to you for free.
Trust your own instincts and knowledge more.
This comes back to doing your own research once again - you can't get out of this aspect of trading penny stocks if you really want to stand a chance of making a profit.
Another mistake is to think that profiting from penny shares is easy.
You might just pick a good company that is about to enjoy massive success - but it doesn't happen every day by any standard.
Never assume that trading in penny shares will make you your fortune - you could lose a lot of cash through thinking it is easy.
You should also make sure you don't rely on a broker to help you pick your stocks.
Your own decisions, instincts and research take precedence over everything else, so make sure you remember this.
But perhaps one of the most crucial mistakes you could make is to invest money you cannot afford to lose.
This can be disastrous.
Always remember that penny shares are risky propositions.
You can just as easily lose every penny you invest as you can make money.
So before you buy into any particular company, make sure you are happy with kissing goodbye to that money should something disastrous happen.
Save for a while to build up a pot you don't mind losing if need be - but don't bet your last bean on trading penny stocks.