All The Things That You Need to Know About Penny Stocks

Before you make money penny with penny stock you should know everything about penny stock before you dive right in. Furthermore, day trading penny stock has gained popularity in recent years because of the low barrier to entry and the capability to change little sums into larger profits. 

Well, when we are talking about penny stock, there will always be so many questions asked in regard to a penny stock. One of those frequently asked questions such as what to know about penny stocks? Actually, before you get involved in penny stocking there are a lot of things that you need to know about penny stock. Some of the things that you need to know such as what is penny stock, is it illegal to buy a penny stock and many other things in regard to a penny stock.

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What is a penny stock and what is a penny stocking?

Actually, a penny stock is a stock that is available at a low price or you may call it a low-priced stock. Penny stock is also attributed to stock trading for below $5 for every share. Thus, penny stocking is the action of marketing penny stocks. Yet, it can be said that trading on penny stock is identical to trading on a major exchange because trading in penny stock has its own distinctiveness.

How does penny stock work?
A common major exchange usually adopts the conventional type of buying and selling stock that stands on presuming in the company long-term possibility, while penny stock leans on the chart pattern.

Therefore, through the chart pattern, you could determine what kind of stocks to buy, sell. These chart patterns will be able to help you to know the exact price of the stock based on the “price moments” in the market.

Is it illegal to buy Penny Stocks?
Another fleeting question in regard to penny stock is where you can buy penny stock? And is it illegal to buy penny stock? Well, you could buy penny stock on common exchanges such as the Nasdaq.

However, you could buy the stocks at a major exchange such as the NYSE, but this kind of major exchange already has specific listing requirements. And most importantly, you should stay clear from companies that are published in the pink sheets because it doesn't have special requirements and it also absolutely does not register on the SEC. Thus, buying stocks from the pink sheets is a big no because they are risky and highly volatile.

Then about the next question is it illegal to buy penny stock? Well, of course, a penny stock is illegal. Nonetheless, there are a lot of shadowy dealings all over the penny stocks. Even though the safest penny stock trading is through some major exchange like NYSE or Nasdaq, the truth is the vast majority of penny stocks dealing are happened on Over the Counter or shortened as OTC transaction. Moreover, the regulations for OTC stocks are not as harsh and strict as the other major exchanges, so the OTC stocks are more prone to counterfeit practice.

On the bright side of this bad stuff that is going on, you could learn how to smartly do the penny stocks and also do research in regard to penny stocks as well as a lot of practice you could definitely ace through this scheme. Furthermore, if you are the type of person who likes a challenge, you could try to find gaps in these kinds of bad stuff and turn them into your benefits.

How to Invest in Penny Stocks

Another commonly asked question in regard to making money penny through penny stocks is where to invest in penny stocks and how to invest in penny stocks. Well, first thing first, before you choose stocks to invest you should find the trustable penny stock in which penny stocks to invest. Usually, the safe penny stocks to invest in are the one that is listed on the major exchanges such as Nasdaq and NYSE.

Actually, there are some ways that could be done to invest in penny stocks. The most common way is by buying stocks based upon the assumption, in which the stocks price will increase, and then you proceed to sell these stocks once they come to the desirable price.

Another approach that could you do in investing through penny stocks is by short-selling them. This approach indicates that you believe the penny stock price will decrease. You originally borrow stocks that you don’t already own, and then you proceed to sell them when the price of the stocks plummet. 

You must remember one thing, no matter what ways that you could choose to invest in penny stock, the objective is to gain profit. At the start, the profit may be little, but over time it will get bigger and bigger. You just need to be patient and never lose hope.

What are the most common investment Types?

There is one essential thing that should be remembered when you want to do investment whether it is on the penny stock or on the other form of investment. You should remember that never risk more than you can afford because as is mentioned before, investment is a risky and tricky move, so you have to be sure and careful.

Well, penny stocks are a kind of investment, but actually, there are a lot of kinds of investment other than penny stocks. Basically, investments are a lot of things that you could place your money into with the hope of a rebound. Therefore, you need to invest your money wisely, and in order to do that, you need to select the companies or business that is legal and well established. Furthermore, surely you will select the one that promises a little risk and promotes a high return.

Additionally, penny stocks are a kind of stock. Well, do you know what stock exactly is?  Stock is a settlement that gives you fragmented ownership of a business or a company. Furthermore, companies hire more employees, create new products, expand their markets, and fund other necessities by establishing money through the stock market.

Furthermore, it could be said that as a trader, you are purchasing shares of a specific company, which can propel up the price. If you are able to make the right judgment, in which you sell it when the price goes up, and when the price goes down you do the short-sell and then take your gains. As stated before, the stock is just one kind of investment, thus below is some other kind of investment that you need to know.

• Stocks

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As we all know that stock is a share of a company. Thus, you could buy shares at a specific price, and then you could proceed to sell them for a gain or lose. This will depend on your ability to make the right judgment.

• Commodities
Another common kind of investment is commodities. This form of investment attribute to physical items or raw materials that are coming from the earth which include oil, gold, tobacco, wheat, silver, and many other commodities. Commonly, they are commutated through the open exchange, the most typical commodity of it being oil.

• Derivate
This one is the kind of investment that takes their value from other objects. Here is an example of a derivative, rather than buying or selling stocks directly, you could choose another option where you make an agreement with the privilege of buying or selling a particular number of shares at a certain date.

• Real Estate

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The next kind of investment is real estate. This one is another level of investment. There are many kinds of things that belong to real estate investment. Some of them such as casting houses or properties that are sold in auction, renting houses or apartments to tenants, enhancing commercial areas, and many other real estate investments.

The distinctive characteristic of Penny Stocks

Before you want to know further about making money penny through penny stocks, you better know about the distinctive characteristics of penny stocks. The initial thing that you need to know about penny stocks is that they are not identical to trading the other stocks on the major exchanges. Penny stocks are not stable, and well-established companies. Commonly, they are small companies.

Most importantly, when these kinds of companies are not listed on the major exchanges, they are not needed to make the identical SEC stuffing that is mandatory for bigger companies. This indicates that things you might presuppose with bigger companies can’t presuppose with penny stocks.

Furthermore, the vast majority of people are sensibly skeptical about penny stocks because they can be a little bit skimpy. This is because they think that trading through penny stocks is too tricky, too risky, too difficult and they also don’t want to take their time to figure things out on their own. However, if they want to learn a little more about penny stocks and do their own research, and also really take a look at the chart patterns, they may come to an agreement that penny stocks are fairly easy to trade.

In addition, penny stocks are also distinctive in terms of you can learn all about them as you go. Why is that so? Because you only invest a little number of shares in every play, then as a result your rebound may be small too, but so are your losses.

Furthermore, this kind of scheme will enable you to grow up slowly but surely, over time. With all that being said, trading in penny stocks could be risky and tricky, but you need to remember that you don’t have to take a massive risk. In order to avoid big losses, you could try to take small positions so that you could stay clear from a big risk that could cause massive losses.

Where to find penny stocks

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Another thing that people are usually curious about penny stocks is where can I find penny stocks? Well, the safest place to find penny stocks is on the Nasdaq or NYSE. However, not every business or company could meet the standard requirement of those major exchanges. Apart from that, you could also find penny stocks in the over-the-counter market or OTC and on the pink sheets. Those penny stocks that can be found on the pink sheets are not recommended because they don’t have legitimacy and are prone to fraudulent practice which could put you at a high risk of manipulation.

Are Penny Stocks actually worth it?

Actually, this one is also a frequently asked question in regard to a penny stock, many people ask whether or not penny stocks are actually worth it. Truthfully, penny stocks are worth it, if only you could show a good work ethic. And then, you should have a willingness to do your own research in regard to penny stocks.

Furthermore, you should also learn to be more disciplined in trading through penny stocks. And then, you also need to stick to your trading strategies and plans. And the most important thing is you should learn a lot about these penny stocks.

All in all, if you cannot do the above things, then penny stocks are absolutely not worth it for you.

However, if you are willing to train and educate yourself, and become an independent trader, then you could say that of course penny stock is worth it.

The risk in investing through penny stocks

As mentioned above, trading through penny stocks is risky and tricky, so of course, there are some risks in investing through penny stocks. Some of the common risks by trading through penny stocks are they are usually not as standardized as the other massive cap stocks. And then, they are volatile and most of those companies most likely will fail. 

However, the thing is there is always a risk related to any kind of investment. Investing in large-cap stocks also has a risk. It is true that investing in large-cap companies could be paid off, but you also need to think about the period of time that you need to wait for your investment to be paid off. Why? Because it could take years and years and more years. And the saddest part is, even when you are already waiting for a long period of time, there is still no guarantee that your investment is going to be paid off.

How to trade penny stocks

And now we come to the part of how to trade penny stocks. Actually, to be able to successfully trading through penny stock you need to understand what actual penny stocks are, and then you also need to know how they work, and most importantly you also need to pinpoint patterns. Below list are some of the principal things in trading that you need to know.

• Broker
Before you start trading you need to have a brokerage account. Once you already have an account you need to open it. Actually, your broker is a portal between you and trades. Therefore, it is essential for you to choose the best broker.

• Stock Screeners
This stock screener could help you to limit the number of stocks that you could trade. This screener is useful to filter the stocks that are based on criteria that you have established.

• Charting software
You will need this charting software to really get a good insight into a stock’s health, in order to do that you need to do a well-detailed analysis. Furthermore, there are two kinds of analysis in trading. The first one is fundamental analysis and the second one is technical analysis. Fundamental analysis is the analysis that is done by collecting some information from the company itself. Meanwhile, the technical analysis is where you analyze the company through the stock’s chart and then look for the recognizable pattern.

• Trading plan

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This one is the most essential thing in trading through penny stocks. Basically, this is your map where you layout your entry and exit points.

How to minimize your risk with your trading

As we all know, trading through penny stocks is a risky and tricky thing to do. Hence, here are some ways that you could do to minimize risk with your

The first thing that you could do is to stay clear of pink sheet stocks. Why? Because their stocks are prone to manipulation and fraud. The next method so you could lessen your risk of losing a lot of your money through trading in penny stocks is by avoiding pump-and-dump scammers.

A lot of OTC penny stocks will be recommended as the next breakout, but the truth is that the big companies that offer a near guarantee of successful trading penny stocks begin with a high-priced IPO, and most definitely they will not be available on the market stocks.  

And then, you will also need to avoid liquidity that is happening in penny stocks. After that, you also have to keep in mind that you are not allowed to over trade. And last but not least, in order to lower your risk in making money through penny stocks, you need to focus on trading and not investing.

All In all, the massive explanation above is the things that you need to know about trading in penny stocks that you should definitely know before you decide to make money penny through it.
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