A quick search online will quickly turn up many offers by people who want to give you advice on picking your next penny stocks. They’ll probably be telling you not to miss the next big thing, and selling hard. However, before you jump on those penny stocks, it’s time to think over your next investment.
There are two basic ways to make money in penny stocks. One is to “buy the hype” or jump on the bandwagon while a company is getting a lot of press coverage. Increased interest means more buyers and a higher stock price. You have to time this incredibly well, however and good tools allow you to do this.
There are plenty of traders who buy and sell at a particular price, or who sell at just half once they reach their targets. These penny stock traders also use a stop loss at a specific level. If you have good timing, you could stand to really profit on this kind of deal.
However, if you’re trying to get in on the stock deal while everyone’s still interested, you’ll be spending your time on the edge of your seat as it can be very exciting.
Watching the price ticker constantly is vital, since you can’t afford to miss the signs that a particular stock is selling. A stop loss gives you some level of protection, but penny stocks are prone to wild and radical price swings that could cause you a loss if you’re not careful.
The other primary method for picking penny stocks is to “buy the company”. You’re not meant to literally purchase the actual brick and mortar business, but to look at what you’re investing in and choose a sound company. There are more than a few shady businesses in available penny stocks, but most of the smaller companies are trying hard to turn your investment into a bigger market share. It’s in their best interest.
They’ll experience big ups and downs, but credible companies will have solid, clear cut goals, and they’ll show shareholders that they can execute them. Companies like these are a great pick in the market.
On the down side, delays in executing this business plan or the falling of the company could cause you to lose more of your money than you might otherwise.
The most successful traders are either wizards at timing by using good tools, or they build things up gradually. Just remember that small caps can make you a lot of money, but should never be more than a portion of your long term portfolio in my opinion.
Make sure you know what aspirations the company you’re investing in has, and that you feel like they can achieve them. Not sure? Take a look at their past track record and see how they’ve done before. A company that is in it for the long run and knows how to make money will be rewarded by the market.
Another important tip is keeping short term plans short term and long term plans long term. The fastest way to lose money is to lose track of your plans, get too excited and let things shift. Never allow your stop loss to slip, and don’t fall prey to greed. You may think you’re letting your stock earn a bit more, but it could turn into a loss fast. Fortunately, if you know what you’re doing, there’s plenty of money to be made in penny stock investments. You just have to be careful, do your research and learn.