We all know that trading penny stocks is very risky, but it is also profitable. These shares can vary from 0.12 $ TO $ 22 in very short time. But this is not the case with every penny stock. There many techniques for trading penny stocks, three important strategies are given below
Find cheap stocks at stock exchanges
As the name suggests shares of penny stocks are valued under $ 5. Trading penny stocks that listed in formal stock exchanges are safer as compared to other penny stocks as stock listed on stock exchanges has to follow reporting instruction. However finding cheap stock at stock exchanges is difficult task. Penny stocks available on these stock exchanges are not of small companies. These companies are trading such shares probably due to financial trouble. When you are opting for this method you have to see why particular penny stock is trading on low price.
Penny Stocks in OTC market.
Penny stocks are traded on over the counter market. Penny stocks traded on OTC counter or pink sheets are of startup companies or small companies with share price of less than $ 1. There are thousands of penny stocks available in market, to find out worthy stocks you have to do complete research as 95 % are useless. OTC penny stocks have more risk, like they are highly liquid, not all shares traded daily. Sometimes when you buy OTC penny stock, you fail to sell it on profit due to their low volume and high difference between bids and ask price.
Majority of OTC market stocks are of low quality, worthless stock, only few of them are good for investing, but with full research. Key point is how to find worthy stick out of such junk stock.
Deal with Pump and dump activity
Pump and dump is unethical practice and very common in penny stock trading. Scammers buy large amount of shares like low priced OTC penny stocks, they promote this tocks to influence the market and to investor buy the stock, and it results in increase of share price. When price increases, these scammers sell all their shares immediately. This activity reduced the share value to zero, investors fails to recover from such situation.
Try to identify pump and dump activity as soon as possible, try to sell all your shares when prices are rising, further more try to close your deal before price collapse. This method is very risky and unethical because you are doing the same what scammers are doing. The other reliable method is to track the pump and dump penny stock at right point; this needs complete knowledge and full research.
Whichever method you may choose, but keep in mind that trading penny stocks is very risky option of investing. Gaining complete knowledge and research is very important for trading penny stocks. Dealing with penny stocks is absolutely crucial. With sound technical knowledge and thorough research you can earn big profits from penny stocks trading.
Penny stock trading is a risky investment options that offers low priced shares and give a hope of big rise in the price. Penny stocks commonly traded on less than five dollars per share and generally available on OTC market. Penny Stocks are low on liquidity as there are not many buyers and sellers of such shares in the market. The companies usually offering penny stocks are in bankruptcy. It might get difficult to find actual valuation of business in financial crisis. If company goes out of business, everything goes wrong; you may have to bear heavy losses. Companies might recover from financial crisis but it takes time, you have to be patient, chances of good returns are there, but they may be smaller than your imagination.click here for more strategies for penny stock investment.
To buy and sell penny stocks at good price is very difficult because even knowing the right price is not possible. Because there are so many promoters of penny stocks in the market try to mislead you. Most of the people promoting these stocks are more interested in making money from compelling you to take subscription of penny stock newsletter. As penny stocks shares are under priced, these promoters make other people to buy these shares to drive up the price, and sell their shares at inflated price.
Making money from penny stock trading needs your time and patience, don’t run for hype, wait for true value. There is no broker as such who can help you to become wealthy by trading these small cap shares. To become successful investor penny stock trading is not enough, there are no cheap stocks available in the market that can give you incredible monetary returns in days or weeks, anyone who suggest you this try to mislead you. However you can invest in penny stocks if you are willing to take risk.
Trading in stock market is open for everyone. But all stocks are not affordable for everyone. There are three basic types of stocks available in the market. One is large cap investment option offered by multi-billion firms, other option is medium cap shares, and small cap trading called as penny stocks.
Why an investor should choose penny stock trading here are some reasons;
- Penny stocks are affordable for everyone. Its starting value is less than five dollars per share. In fact the common price is at three dollars sometime one dollar or even less than a dollar. The only problem is that there are not many frequent investors of penny stocks as they are less liquid, moreover they generally lacks required information that is important for decision making.
- Penny stocks have more frequent press releases as compared to other types of stocks. Promoters of penny stocks do this to make people more aware of penny stocks resulting in getting more investors. The demerit of this activity that sometime motive of promoters is to overhype the stock. Luckily if you find some reliable source, media exposure can increase the price of your share
- While risk in trading small cap shares is often higher side, there are still chances to earn good money. Slowly and gradually you understand market to gain substantial profit trading penny stocks. With right investment strategy and attitude you can do well.read more penny stock trading risks at http://www.boycott-boycottnovell.com/penny-stock-trading-is-risky-investment-option/
- Some new companies trade penny stocks for initial capitalization. For trading penny stocks of new company, you have to check company’s complete background. Extensive research can help to determine possible success of such companies.
If you wish to invest in stock market but don’t have enough funds, go for penny stock trading investment option. You have to be really smart to deal in penny stocks.