It is important to realize that not every stock you buy is going to result in a good investment. The route to success is to decide on which penny stocks are worth your investment through the analyses thereof.
The most obvious trick is to keep an eye on the penny stock price for any signs relating to which side of the market the stock is moving. The ability to make the right choices can ultimately lead to good profits on your investment.
Many traders have the tendency of following the crowd when it comes to penny stock trading. At times it is a good idea to break away from this trend and follow your own feelings, especially if your opinions differ.
As a penny stock trader not keeping your eye on the fees and commissions charged by brokers can result in unnecessary expenditure on your side. If you find yourself in this position, do some investigating. It is important to understand how these expenses are calculated.
A phrase to note in penny stock trading is “Reverse Split”. This is often used by companies as a last ditch effort to prop up the share price resulting in a decrease in your shares and more often than not, a decline in profitability.
Should you find yourself hitched up with a failing penny stock, the smart option would be to bail and cut your losses rather than be tempted to add to or hold on.
It is worthwhile to note that even though the majority of people trading penny stocks trade long, short opportunities should not be discarded.
It is very easy to become greedy when one or more penny stocks in your portfolio shoots to the top. The temptation is there to hold on hoping for the trend to continue forward instead of selling. The decision to hold on too long could, however, result in a “round trip” which sees the stock fall right down to where it initially started.
Finally, it is a good idea to make use of stop loss systems to protect you from risk in trading penny stocks.