What if You Would like to Invest in Penny Stocks?
You can still invest in penny stocks if you wish. The risks of doing so are high, but that doesn’t mean they need to be off limits. In fact, you can earn money from penny stocks or at least reduce the risks involved should you use a few basic approaches. A number of these are common sense steps alongside a few more comprehensive strategies.
Do Not Pay Attention to Success Stories
Maybe you have come across some site discussing penny stocks and you hear someone report he or she has made tens of thousands of dollars in penny stocks? This appears to be a great proposal and motivates you to want to invest in those stocks. The truth is that such success stories, as exciting as they are, are not always valid. The people who claim they’ve made big bucks on trading penny stocks are in the extreme minority. These are individuals who just needed a few lucky streaks. There numerous risks and problems in the current market, sometimes luck is more important than just looking up information on what is offered on the market. For this reason, you should never assume that those success stories will come true for you.
Do Not Hold Penny Stocks Too Long
Decide how long you are going to hold your penny stocks. You will never know if something will change at a given time and can shrink in value fast.
Consider how Glance Technologies inventory has changed over time. GLNNF had a value of $1.40 round the start of 2018, but that stock dropped quickly to 60 cents in about two months.
A lot of people buy enormous numbers of shares in penny stocks, and it is no surprise that individuals could experience huge losses. In the end, many might buy a fantastic number of penny stocks because they’re cheap and that more has to be bought to make a decent profit. When someone holds a stock for a long time, that person is in danger of experiencing huge drops in the stock’s worth.
It’s perfectly fine to purchase and sell a penny stock the same day. There’s always a possibility that you may lose more than what you may profit. The tiniest check out these penny stocks should always have the smallest holding periods.
A good strategy for selling penny stocks would be to sell them when you’ve got a 20 or 30% return. For instance, buying 100,000 shares of a stock at $0.01 and then selling them at $0.012 is great as you’ll go from a $1,000 total to $1,200. This is an ideal 20 percent return. Some investors may hold the shares together with the assumption that a stock could really move forward. Someone might assume that the same stock at $0.01 will move around $0.1. It would take a lengthy time for this to happen even though it did. Obviously, smart traders will have sold their stocks when they reach a 20 or even 30 percent profit threshold anyhow, thus making it next to impossible for the inventory to actually make that massive increase.
On a related note, you should try to get a stop order added to your trade to maintain potential losses from being a threat. Then again, some brokers might not really offer such orders on penny stocks on account of the elongated risk associated with them. The risk of a pump and ditch event could make it so the true value goes beyond whatever your stop order was for; you do not wish to have a stop order at $0.1 only for the stock to fall into $0.06 at that moment.
See Company Information
Some businesses might state that their shares are growing nicely. However, company management might hamper their documents toward the more positive things about a stock exchange. They may also inflate some of the favorable stories to make them sound more exciting and rewarding than they really are. Companies aren’t necessarily needed to tell you certain things in their stocks. They may work really difficult to make their stocks much more intriguing for you without revealing anything of actual substance. Always take anything a company says about its own inventory and the way the company is changing with a grain of salt so you don’t fall into any investment cubes.
Choose Stocks With a High Volume
The next tip is to remain only with stocks which feature a good trading volume. These are the shares that people are really purchasing. These may include things like stocks which are traded by many men and women, thus reducing the risk of a pump and dump scheme on a inventory. Anything with a trading volume of at least 100 million is obviously worthwhile. This implies that at least 100 million shares have been traded over the previous 24 hours of trading.
There’s one major caveat to this tip. You need to look at the way in which the volume changes based on what is displayed on the chart read-out to get a penny stock. As an example, a chart may show a couple of massive spikes in the purchase price of a stock exchange. This means that one person has controlled much of the trading. Obviously, it may also be a indication of a pump and dump attack.
Any stock with a trend line or chart that’s a little more diverse and doesn’t have lots of odd shifts in its value is always easier to trust.
Avoid Trading More Than Needed
While you might be invited to buy a million shares of a stock at a value of $0.0005, and that may really be a critical danger. You would spend $500 on an investment which may go south rather quickly if you are not careful.
You’d only be spending $50 on your trade, but you aren’t going to eliminate a lot of money if the stock declines rather than increasing as you anticipated.
Never Sell Short
Selling short appears to be a great idea when you think about it. You can borrow shares of a penny stock that seem to have been pumped up, sell them and buy those stocks back to get a sizable gain. The truth is you could lose more money from the trade than what you may be able to afford. The period of time for a short sale might be far too long for a penny stock.
Review Your Ranking
Consider how your position is organized based on the size of the stock’s volume. Never trade more than 10 percent of the stock’s volume. You would wind up inflating the price of the inventory if you did this. Purchasing far too much in a time only adds to your general danger involved with the trade. You have to be careful when getting this part of a trade organized.
Remember when working with penny stocks that you are totally conscious of what it is that you are entering into in the process. Such stocks could prove to be dangerous and harmful to your investment strategies if you are not careful.
