Investing In Penny Stocks The Secrets
Some of you, who are chivalrous and not averse to taking risks
, might be interested in penny stocks. But, investing in penny stocks gives the opportunity to win some as well as lose some very quickly. So, here are some ways that will help you lower your risk of investing in penny stocks:
-When you are investing in penny stocks, make sure you are investing in the right company because most of these companies is either starting out or they have purchased a shell company that is cheaper than an IPO or they do not have a business plan good enough to justify investment bankers money for an IPO.
-Always go for the companies with consistent high volumes of shares being traded and also look for the number of trades per day. Also look for liquidity. If there is no volume, then you may sell the shares by just dumping them at the bid, which will result in lower prices.
-You must find out companies who know how to make profits and know how to use the money to grow the business. Do some researches to look for such companies that will help you lower the risk of loosing your capital.
-Always remember, penny stocks are unstable and they move up and down very quickly. So, have fixed approach and stick to it.
-You can find about penny stocks through newsletters. Subscribe and track the investments and see if there are good opportunities to make money. In this way, you can very easily predict if you have subscribed a good newsletter or not.
-Never invest more than 20% of your portfolio in penny stocks. If you put most of your capital at risk, then you have increased chances of loosing your capital because penny stocks usually are great risks to begin with.
Avoid penny stock fraud
Penny stocks usually involve a lot of risks. But they are hit for many penny stock investors. Because of this, there are lot of risks and frauds involved in penny stock trading. But dont worry. Here are some tips that can save you from being trapped in fraud games:
-Do some serious research about the different companies and check whether you are investing in the right company with real operations. Look for different type of the news about the company and check if they have done anything lately like distributing or building anything that you can see.
-Penny stocks are usually traded everywhere. But it is advisable to invest in penny stocks listed in exchanges like AMEX, NYSE and Nasdaq. There are many penny stocks being traded via the Pink Sheets and OTC Bulletin, but they are prone to scams.
-When you are trading through brokers, always trade with highly reputable brokers. Your trader should be known by the usual Wall Street trader. Be aware of traders who can charge you more than the current value of the stock.
It is quite exciting to invest in penny stock trading. With a little awareness and precautions, you can achieve success in your trading.
by: Danielle Saige
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