It is imperative to understand the basics of penny stock trading before actually taking the plunge. If you are new to trading penny stocks and could use some pointers to help you along the way, then this quick guide to penny stocks for dummies will most certainly come in handy. Below are a few pointers to help you make a success in your trading venture.
1. It is recommendable to subscribe to materials which have a proven track record of providing information which will help you in your trading venture.
2. Remember that trading penny stocks is high risk high reward model and therefore it is important to set realistic targets, and then sell when these targets are achieved. It is easy to be tempted into holding on too long. Generally, this will only result in a loss rather than a profit.
3. It is recommendable not to have all your eggs in one basket. Spread the risk by investing in more than one stock instead of just laying on a single stock. You should also scale in to your trades because of the low liquidity. Please review this stock trading lesson on scaling into stocks.
4. When trading in penny stocks, short term trading is what usually results in success instead of long term trading.
5. Due to the high risk associated with penny stocks, it is advisable to begin your penny stock trading venture by investing only what you can afford to lose.
6. Consider that the commission due to penny stock brokers is not dependent on gains or losses. In other words – they are not really success driven.
7. Be aware of scammers who are only out to make money out of your inexperience.
8. Compile a list of penny stocks you want to invest in by subscribing to a reputable newsletter or website (not a penny stock pump and dump newsletter). Even better, use your own stock screener so that way you completely bypass dangerous pump and dump newsletter scams. Please review this lesson on how to find penny stocks to learn more about using a screener. I also did this second lesson on penny stock screening that you need to review.
9. It is important to familiarize yourself with the actual company you intend investing into and not only focus on the stock you intend investing into.
10. Like most other things in life, your knowledge in penny stock trading will be gained through the experience thereof if you don’t go broke first.
If you want to start trading penny stocks online, it is important that you learn everything there is to learn about penny stocks. This quick guide to penny stocks for dummies will help get you on the right track. Please make sure you read this SEC and FINRA page on penny stocks before investing in them.