To begin trading penny stocks, you have to understand much about it first. The first things you need to know about trading penny stocks is what it is. By definition, penny stocks are those that trade under five dollars each share. Because of this, some traders try to do away from trading them due to the very high risk that’s involved in owning them. Since they are volatile, some can get huge gains in very short time but there are also those who easily lost their shares. But wouldn’t you want a taste of the fortune that others have gained in this type of stock? What is their secret?
As an investor, you need to understand why they are considered to be risky investments. As mentioned earlier, penny stocks are highly volatile in the stock market. The establishments often have no track record of concrete financial performance. The silver lining in trading penny stocks, however, is that you don’t have to spend so much in your investments. And if you happen to strike a gain, you strike gold.
The second thing to do is to select a reliable broker. Your broker should be someone who can work in compliance with your state’s Securities commission. Also, it would be an added plus if your broker charged reasonable fees. You’d want him or her that only performs your orders for a fee instead of one that asks for a fee for every recommendation and research work, which in turn will generate a far greater expense in the long run.
Penny Stocks : About Penny Stock Trading Video
Penny stocks trading refers to companies that trade for less than a dollar, but investors must be careful when trading penny stocks because of fraud. Find out how to contact the manager or trader of a specific fund when buying penny stocks with help from a portfolio manager in this free video on penny stocks and investments.
Be very careful especially if you are a novice who is just learning how to work with penny stocks. Be extremely cautious with how much money you put at risk and with how much earnings you call for with every trade. Begin with small steps in both areas, practice and gain experience. In a number of months to a year you’ll be much more informed. But if you’re a beginner, it’s easy to lose discipline, become greedy and experience huge losses.
Go with the same basic investment rule for penny stocks as you would for bigger stocks – do not put all your eggs in one basket. It is wise to spread out your penny stock portfolio as you would any investment portfolio. When it comes to the basics, there’s not much difference between stocks.
Find out which stocks are off the bat. Such stocks aren’t traded on one of the main U.S. exchanges. Also avoid companies that have below $10 million in revenue yearly. Any organization suggested in random e-mails should be dealt with cautiously, since some people are actually paid to produce hype in order for shares to sell.
Recognize the red flags. Typically, these are companies running for the sole purpose of getting money through stock dilution. Try not to work with something you don’t really understand well. Choose an industry that you at least know something about or are interested in. Go for companies that have earned on a consistent basis and are proliferating their free cash flow over time. And needless to say, avoid those with a lot of debt.
Trading penny stocks should be looked at as a business and not a pastime activity. This means comprehending and handling your profit and loss the right way.
Know more concerning good penny stocks, where and how to get them. See online reviews of great penny stocks to buy.. This article, Trading Penny Stocks – How To Do It Right has free reprint rights.
Invest in Penny Stocks: A Guide to Profitable Trading
by: Peter Leeds
publisher: Wiley, published: 2011-03-01
sales rank: 43652
price: $28.78 (new), $27.65 (used)
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