The concept of penny stocks trading is often seen as gambling by some people. This is because trading in these stocks has potentials for big profits as well as losses. With the right amount of knowledge though, one can successfully trade penny stocks and still make much profits while curtailing losses. Before we go right into how beginners can get started with this, it will be nice to have a picture of what penny stocks looks like.
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What are Penny Stocks?
Penny stocks are highly-speculative, low-priced stocks of companies with small market capitalization. These stocks are considered as those trading below $5 though initially, it included those with share prices less than $1. Penny stocks are not traded on the major exchanges rather you’ll find them over the counter on OTC Bulletin Board (OTCBB). These stocks could be lucrative but are considered high-risk because of the lack of liquidity, the small market capitalization, as well as the sketchy amount of details available this website about companies operations to the public. All of these make the investment a kind of high-risk venture but the following parts of this article will detail how you can trade penny stocks successfully as a beginner.
The Decision Making Process
Before you begin trading, you should take out some think to weigh your options. Penny stocks have the possibility of good returns, likewise, they could do otherwise. Do you feel strong enough to still trade, knowing this? If you feel like you’re good to go, another decision you may have to make is about how much you’d allocate for the investment. Mark out clearly your limits and invest only those amounts you can risk losing. This is to safeguard you against unforeseen changes and occurrences with your trades.
At this point, you’ll need to get up and do your job. Don’t just sit back and splash your hard-earned cash on penny stocks you’re not really sure of. For starters, you can try to dig out information from the internet about the company. Penny stock firms rarely have enough information available to the public and this requires you dig as much as you can. For starters, you should at least know what services or products the company produces. Other information about the company’s management, the age of the company, its competitors as well as why you feel like the company is set for growth should also be sourced.
Expert Tips and Advice
Now, when you’ve done your own part of the job, you’ll still have to seek the advice of experts and experienced traders. You may have people like this around you but we aren’t talking about that colleague at work who gives you tips or your pizza delivery guy who told you he’s an expert trader. We are talking about expert traders and professionals or agencies with a proven track record. It could also be an online penny stock website like Awesome Penny Stocks where you can get the best tips and hot picks before they become general knowledge. Many new and established penny stock traders prefer the online method and if you do too, the online firm mentioned above has a strong track record of success to be your top choice.