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Guide to Trade Penny Stocks

 
 
 
 
The concept of penny stocks is simple:
 
They promise a good amount of profit on small investments, but they can also be a good way to lose money.
 
  • It all depends on the person who is trading the penny stocks; if you know the game, it's very easy for you to profit.
 
But if you do not, the odds are against you.
 
You can make a nice return with a relatively small investment and if the trade works.
 
For example, say you buy 10,000 shares for $3,000 of a $.30 stock.
 
Let’s assume the stock reaches $1, and then you can make $7,000, which means you have doubled your investment easily.
 
If you are thinking about investing your money in penny stocks, you should have in-depth knowledge of the game.
 
 
In this article, we have summarized all the steps that you should take in order to be successful. 

 

Decide Whether Penny Stocks Are Right for You or Not

 
Ask yourself, do you know the basics of the game?
 
Will stepping in the game be beneficial for you?
 
Even though penny stocks have a lot of great attributes, they are not right for everyone.
 
They can truly turn your small investments into a good sum of money, but they can also quickly wipe your investment out.
 
In order to avoid this risk, first, get in-depth knowledge and then go for picking up the penny stocks.
 
Make sure that whatever you are investing in does not lead to you facing financial loss.
 
 
 
 

Get Honest Guides and Risk Money

 
In order to get a tight grip on the penny stock market, follow someone who
knows the industry very well.
 
  • Try to reach an expert and seek his or her guidance.
 
In this way, you can learn from their experience and can avoid mistakes of your own.
 
Start with small amounts, and once you have gained significant knowledge, only then go for bigger investments.
 
  • Only invest risk money or those funds you can afford to lose.
 
Do not put all your funds at risk.
 

 

Opening an Account

 
Ease of transferring funds, customer service, and funds are basic factors to
consider when opening a trading account.
 
  • Take your time to choose the one that meets your needs.
 
Choose a broker that offers a low flat rate per trade, as fees and commission both are dependent on it.
 
 

 Start by Paper Trading

 
Paper trading is simulated trading which allows you to learn how to trade (buy and sell stocks) without risking real money.
 
  • In other words, it is a no-money required, risk-free method of buying and selling low-priced shares.
 
Here, you make use of a portfolio of imaginary money to keep track of imaginary trades in real stocks.
 
Through this practice, you can not only make a more knowledgeable
jump into real money but also can avoid big mistakes.
 
  • You can also try your own investment strategy; if that works, you can implement that with real money.
 
 
 
 

Decide Target Companies You Will Focus On

 
The best thing you can do with your money is to invest it in the right place.
 
At the market, you will hear that these are the latest hot industries.
 
You will surely think that investing your money in any of these companies will benefit you – it might, but we would advise you not to go for it because it typically means that the company is on everyone’s radar.
 
  • The trade is already crowded, over-priced, and matured.
 
Also, some of the pro investors will be there, along with their smart investment strategies, which will surely make your way difficult.
 
Therefore, go for companies where you can easily stand out.
 
 

Generate Prospective Investments

 
Once you step into the industry, you will find many sources; out of them, you
should choose the reliable sources and use that as a jumping-off point.
 
However, keep in mind not to trust any source 100 percent.
 
  • Use them as a way to get suggestions of prospective companies to watch.
 
On the basis of your knowledge and experience, conduct your own analysis, prepare your own trades, and take full responsibility for future consequences and results.
 
You can use online tools for uncovering potential investments.
 
  • Try to find stocks yourself via a stock screener such as FinViz.com.
  
 

The Bottom Line

 
Trading penny stocks is not for everyone.
 
You should be patient enough to tolerate a certain amount of risk, and able to quickly react in uncertain situations.
 
Not everyone can make their place in the trading market.
 
Make sure to educate yourself with the basic knowledge, along with money management techniques.
 
Invest smartly to avoid losing all your hard-earned capital.
 
 
 
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