How you can succeed with Trading Penny Stocks? Firstly, start by deciding if Penny stocks are right for you!
Penny stocks and shares at low prices are not suitable for everyone, even though they have many great attributes. They can really turn a small investment into a large sum of money quite quickly (but they can also erase those dollars just as quickly).
For many people, the potential for great rewards does not outweigh the risks. Be honest with yourself, and don’t feel bad about moving away from the whole concept. In general, this is often the best option, because most of the situations involving penny stocks result in many investors taking losses.
In many cases, novice penny stock investors lose dollars because they are buying the wrong shares, at the wrong prices and, usually, for the wrong reasons. These investment risks can be easily avoided, mainly by learning a little about the reality of the penny stock trade, which this article will show you.
For example, the vast majority of investors buy penny stocks that operate in dark markets, where almost everyone will lose money. On the other hand, by getting involved with high-quality companies in the most serious and regulated exchanges, you choose investment options between legitimate and promising companies.
These are mainly serious companies, with proven business models. The penny stocks listed in the best markets turn out to be very new, or even small, and they are also selling for pennies … until they are finally exchanged for dollars!
Money risk and honest guides
You should only invest in penny stocks with risk money or those funds that you can afford to lose.
You should also dip your feet in the waters of low-priced stocks once you have acquired significant knowledge, and have a strong stomach for potential volatility, which can sometimes be found in investments that operate at the lowest prices.
Follow someone who knows the industry very well like Timothy Sykes. Sykes, originally from Orange, Connecticut, and now living in Miami Beach, Florida, wants to convey his knowledge and boasts that several followers who have followed his example through DVD tutorials and his blog are now billionaires. He states that transmitting his knowledge is much more satisfying than his luxurious lifestyle.
An expert can help you avoid mistakes, and you can learn from their experiences. These are true words, whether they are penny stock, home renovation, cooking, yoga or others. The caliber of your results will be directly proportional to the caliber of your guide. There are some potential mentors for you when you enter the world of penny stock trading at a low price. Some are much better than others.
Most (and this should be an important warning sign) will try to inform you about private jets and expensive cars, whether or not they have private jets and expensive cars. The promise is like a lottery ticket: do this, buy that, trust this guy (or system or trick), and you can have a yacht and lifestyle just like his!
Start by paper trade
You can avoid big mistakes by learning how to operate with the risk-free method and without the need for money to buy and sell low-priced shares, known as “Paper Trading.” All you need is a pen and a piece of paper to keep track of imaginary exchanges in real actions, using an imaginary money wallet.
This is probably the best thing you will do in terms of penny stocks. By keeping track of imaginary earnings in your imaginary business role, you can make a more knowledgeable leap towards real money. This will also help you learn all the relevant penny stock jargon, learn from your mistakes and appreciate all the things you should look for when trying to find the next penny stock winners.
After you have traded Paper Trading for a couple of months, it will be much better in all aspects when it comes to buying and selling speculative shares.
Decide what type of companies you will focus on
Most investors make the mistake of investing their money in whatever is the latest “hot industry”. You know, talk in the news, the taxi driver mentions it, your grandmother calls you to suggest that you buy something …
The problem is that when you hear about which industry is hot, it usually means that it is already on everyone else’s radar at that time. The trade is already full, matured and very expensive.
In other words, the next move for the latest hot industry is almost always inactive. When it comes to penny stocks, changing the fashion now to fad usually results in a significant collapse of the shares of all penny stocks in this hot industry.
The old expression says “buy what you know.” If you are a medical scientist, you will have an advantage when negotiating biotechnology actions. If you are an Internet programmer, your advantage will come when you search for several technology companies.
Not sure what kind of companies allow you the biggest advantage? Just take a look at the industry publications to which you have a subscription, or what your passion implies. Mountain bike? Deep-sea diving? Gold mining? Fashion?
Normally, people overlook their own industry and, instead, focus on what they believe will be the biggest difference for them. In doing so, they give up an important pre-established advantage that they didn’t even know they had.
Our human nature
This is only human nature, especially because the last thing you want to do when you finish the day’s work is to focus on other things related to that same job. Not always, but often, chefs don’t cook their dinner, painters don’t paint their den, internet entrepreneurs don’t surf the net (anyway, too much).
You can be rewarded by reversing this psychology. Focus on those industries and corporations that you understand best. When it comes to trading penny stocks, you want to take advantage of all the advantages.
How will you generate prospective investments?
You need to find a source that is reliable and trusted, and use it as a starting point to find possible penny investments. In fact, you should probably have many sources.
Never trust any source 100 percent. Instead, use them simply to provide suggestions for possible companies to look at. Then conduct your own analysis, make your own exchanges and assume full responsibility for the results.