Penny stocks are probably the most exciting and most profitable stocks you can own. A penny stock has the potential to give you a 1000% gain in 1 day. When trading penny stocks it is important to remember that as quickly as one rises it can decline just as fast and sometimes faster. When the stock market opens at 9:30 am and the bell sounds we are all off to the races hoping that we have made the correct decisions for that day whether it be a new stock buy, a sell or a hold. Even the most experienced trader will make mistakes. It is important not on to keep those mistake limited but once made it is important to know when to take a loss and run from a bad stock investment.
If you are new to trading penny stocks are probably not the area you want to start in. If you feel you are ready to dive in and take risks I think it would be prudent that you only use money that you can afford to lose. There are many sites out there that promote stocks only to dump them once they have realized a sizeable return on their investment. It is not recommended to follow any sort of email subscriptions you have signed up for. With that being said it is also important to be careful of some websites that practice that same method except do it in a more subtle way.
Ok so you decided that you want to start investing and you want to start with pennies. Now what to do? Well first get yourself a trading account with a reputable trading company. There are many out there but check what they allow and don’t allow. Some will not let you trade every penny stock out there.
You have opened your account and are now ready to dive right in. What are you going to invest in and how much should you invest. Now this is where you turn to the internet and start doing some research. There are many websites out there that provide valuable information and can help guide you towards investments and what to look for. Once you have found some site and have read through them now you have a list of stocks you want to look at. Start researching what that company does and what the history of the stock is. This is called doing your DD.
Here are the biggest mistakes new traders make when trading penny stocks. They find a few websites that have forums and chat rooms. They start reading these forums and joining in the chat rooms listening to what others in there are saying. They now see someone saying that XYZ stock is up 50% and still has potential to go up to 400%. Now most would say WOW I got to get in that stock sounds real good and I do not want to miss out on such an opportunity, The thing you didn’t know was the person posting this knew nothing about the stock except that it was currently up 50%.. Now you have bought this stock and all of a sudden there it goes. Now it’s up 70% and you say WOW that guy was right this is great. Then you check again and the stock has fallen back to 50%, ok I am still even. Now you check again and see the stock has fallen to 20% and now you start to worry. You are currently down 30% on an investment that you made because someone in a chat room said it would go up to 400% today. Sound ridiculous? It happens everyday to a lot of people and it will keep happening.
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