Penny stocks may sound insignificant, but they truly can be very lucrative if you invest wisely. However, penny stocks are a gamble just like any other sort of stock investing and if you want to be successful, you have to have a game plan and be very savvy at the same time. Here are some tips you can utilize to increase the likelihood that you will be successful in your penny stock trading.
1. Be Content with Small Wins
With penny stocks, you are dealing with much smaller increments and the basis of large profiting is based around trading large volumes of stocks. There is a learning curve that is involved and it is important to celebrate the small wins and then replicate them.
2. Walk Before You Can Run
Although trading penny stocks, as well as any other types of stocks is truly based on one’s ability to analyze a market and make accurate predictions based on patterns, there is an element that is more like an art form which needs to be learned over time. You need to get a feel of when to make a move and this can only be obtained with patience and practice. Therefore you should start with small increments until you hone in on your craft.
3. Record Your Transactions
You should always keep a record of every trade you have made so you can go back and study them. Trading penny stocks is a game that is based around trends and having a record to look back over and reflect on is essential to growth.
4. Trade during Regular Hours
Always make sure you are trading during regular business hours, as after hour trades can be risky and can get you into some messy situations. It is always best to have accurate and up to the minute updates in order to make the wisest decisions.
5. Do Not Over Trade
Many people get in the habit of simply trading because they feel they have to. If there are not any intelligent trades on the board that you feel confident in, simply do not make a move. This is the most underrated element of successful trading.
6. Know When to Get Out
Sometimes people make some bad trades or simply get unlucky and start to trade wildly because of the emotional aspect of the loss. Nothing will get you in the tank more than this and this mindset is sure to make you lose money.
7. Have Fun
It is always a good idea to strategize and be intelligent when you trade, but you should always keep it a fun activity which can also challenge you, which will give you the most rewarding experience possible.
Penny stocks are the definitive high reward, low risk investment opportunity. With this method, it is possible to make a considerable amount of money off of a small investment. Now, it doesn’t mean you are going to become rich quick, and many of the stocks do not have a large amount of information about the company, so investing can sometimes be a bit tricky. With that being said, if you are able to locate the best penny stocks out there and invest in one that is going to have a solid turn around, you have the ability to by thousands of stocks for next to nothing and receive an excellent turnaround for it.
A penny stock is exactly what it sounds like. It is a stock that costs usually a few cents per share. This is a smaller company that is trying to raise money in order to invest back into itself. Now, most major companies with a solid financial backing do not need to do this. All these larger companies need to do is properly crowd source and it has the money it needs. However, with the help of this sort of financial investment opportunity of a penny stock, those businesses without the necessary resources can bring in a good amount of money to start to expand, and expansion for a smaller company can often lead to major financial windfalls for those who invest in the company.
For a large company such as Google or Apple, a stock is going to cost several hundred dollars for a share. This means the average investor might only be able to afford buying 10 shares for a few thousand dollars. If good news hits, the share might rise five percent in a day, meaning the person make possibly $100 on a good day of trading with those shares. However, when investing in penny stocks, if there is good news for the company and if the few hundred thousand dollars the company brought in through penny stock purchases allows it to reinvest into itself properly, it might cause the stock to increase several hundred percent. Should someone invest a few thousand dollars into penny stocks and the stock jumps a few hundred percent, now they increase their stock work by several thousand, if not tens of thousands of dollars, all off of the same monetary investment as the larger companies.
Some stocks someone can look into and invest with include Key Energy Services, SandRidge Energy, Eagle Rock, Energy XXL or Halcon Resources Corp. Now, the most important thing someone can do when it comes to penny stocks is to do their research, just like any other stock out there. After all, a penny stock has the potential to increase financial earnings, but it does also have the potentially to bottom out and disappear. Due to this, knowing more about the penny stock should prove especially helpful when it comes to trading for this kind of a stock and for financial stability for the individual.
The term “penny” stock is somewhat inaccurate, because stocks considered in the penny stock category can have values of as much as $5 a share. Penny stock is more a description of the market for these stocks, which can be loosely-regulated and very volatile. It’s very easy to make mistakes investing in penny stocks, especially if you are a new investor.
1. Falling for the “pump and dump” scheme
A “pump and dump” occurs when some unscrupulous group or person touts false or misleading news about a penny stock to quickly boost its price so they can sell the stock and make quick money. New investors in penny stocks who hope to get rich quick can easily fall prey to these scams.
2. Failure to do research
Companies that are in the penny stock range are there for a variety of reasons. Some are former high-flying stocks that fell after a scandal or a failure to adjust to changing business conditions. Others are stocks in companies that have unproven products or technologies that have failed to produce sufficient revenue. Before investing in penny stocks, it’s important to research the company to know what you are getting into.
3. Failure to understand the liquidity market
Penny stocks often are thinly traded, meaning it can be difficult to sell, either to take advantage of a gain or to limit losses. New investors often fail to understand this aspect and plan for it.
4. Failure to prepare for losses
Many investors see the penny stock market as a way to get rich. By buying a stock at a very low price, the opportunity for profits is endless. But that rarely happens. More often than not, penny stocks keep falling, leading to losses for those who invest in them.
5. Buying “at market”
Because of the lack of liquidity in penny stocks, it’s easy to pay too much for one. A big mistake is putting in an order at market price, meaning, essentially, you buy at whatever price someone is willing to sell. Make sure to put a specific price on your buy order.