Many people especially those who don’t have much money to do stock investment tried their luck by start trading penny stocks. Penny stocks also well known as the micro-cap or the nano-cap-stocks is generally refer to common shares of small public companies that trade at less than $5 per share. Investing in penny stocks might be the best choice because it has an affordable price.
Everyone wants to be successful and looking for an easy and quick way to be rich. But, it’s important for new penny stock investors to know more the basic things about penny stock because there’s always the opportunity to lose money on your investment.
Stock trading can give high profit if it’s played correctly but there are just a few people able to make money consistently by stock trading. So, if you want to start trading, these are what you should know first before you dive in.
Start by Paper Trading
Many new investors wasting their investment because buying the wrong stocks. This risk can be avoided by learning the reality of trading penny stocks with “Paper Trading“. It can be helpful to do simulated trading with a pen and a piece of paper to make imaginary trades in real stocks. Paper trading can help you to practice trading penny stocks without losing cash in real-life. You can know which potential penny stocks that provide the highest profits, learn some things that you might be doing wrong, and get some strategies before you start the real stocks trading. Take care to understand them first before you begin.
High-Risk High-Reward Markets
Penny stocks have high potential but also it can also be a high risk if we make the wrong decision. There’s anything wrong if you want to start trading penny stocks but you need to understand the risk involved. Just as much money as you can make you can quickly lose too. It doesn’t mean that you can’t find success in trading penny stocks, but it’s just a little bit more difficult and it’s important to become aware of the good side and the bad side. You can go right but you can also go wrong.
Don’t easily follow and trust certain people on social media or other websites and their promise that they can teach you how to make thousands of dollars from anywhere in the world just by trading penny stocks. Because trading is not that simple. If trading was that simple, everyone could be successful in trading penny stocks. Don’t copy everything that someone else does and you need to understand what you are doing. You can follow someone who knows the industry very well and can help you avoid mistakes. Besides, don’t buy a penny stock that has been heavily promoted by someone because the high-quality of the company doesn’t need a promoter to make their stock price become higher.
Where to Trade Penny Stocks
There are many stock markets to trade penny stocks. Nevertheless, you need to know which is the best stock market to trade penny stock. Some penny stocks might be traded on the major exchanges such as NYSE (New York Stock Exchange) and Nasdaq (National Association of Securities Dealers Automated Quotations) but also might be traded on smaller exchange and trade via OTC (Over-the-Counter).
Choose the right company
It can be possible for you to get large profits on the penny stocks if you can choose the right company. The company must operate in good faith and legitimate. You can use a fundamental stock screener to know which company is a suitable pick. Even following updates on Penny Stocks to Watch is necessary to monitor stocks before you start trading penny stocks.