When trading penny stocks, you need to be extremely cautious. You must know the market and be able to guess when a stock price would go up and down. You must know what a pump is and must always be watching the market. Penny stock trading is not like trading normal stocks. It is a lot more time consuming and intense. People say that you cannot make money trading penny stocks, but that is not true. It just takes a lot more work and knowledge. You will learn here about how to make the right decisions when trading penny stocks and stand out above the rest of the traders. It will require a lot of hard work and dedication so do not take this lightly.
You also need to have at least a decent knowledge about how the market works. In penny stocks, the market is very different from the usual stock market. There are many pump and dump schemes out there. This is either something that you can decide to worry about, or something that you can learn to take advantage of. When you see announcements out there in emails or advertisements that say a certain stock is going to hit it big, you may just look away and think nothing of it. You may even tell yourself that it is just a big scam. Well in a way it is, but it can also be something that you can profit off of. When you see these messages of a stock being pumped or advertised, the company that is advertising it may have already bought a lot of shares and the price of the stock may have already increased. When this happens, it may be best to lay low, but if you are the first one to hear about this, you now have an edge.
The trick is to find penny stocks that may be pumped in the near future. Stock promoters can bring any penny stock’s price way up if they so much as send out an email. If you find out what will be pumped before the email comes out, then you will be able to buy before the pump. This requires a lot of research and could take a long time, but the payout is huge. You will need to mainly look for any hint of big news. If you can find out that a company is going to release some big news soon and the stock price has not yet gone up, then that stock may be pumped.
This is not a flawless tactic and you may end up buying a stock that is worthless and will not be pumped so you should only try this with any expendable income and you must also know exactly what you are doing. For people that are just starting out with penny stocks, day trading may be your best option. People love making quick cash by day trading and it may be slow with the normal market, but with penny stocks, everything is fast paced. A trick to this is to find a stock that is just beginning to become pumped up. You need to buy that stock and sell it within minutes for a slightly higher price to make money. This is the most common and quickest method. The only problem with this is that you need to watch out that the stock isn’t at its peak; otherwise you may end up with nothing.
Volume is one thing that you need to pay very close attention to with penny stocks. A stock with low volume may be impossible to sell. Even if the price of a penny stock goes up a hundred percent, you will not be able to sell it off if it does not have good volume. The volume of a stock is usually shown as how many shares have been traded that day. A number over a million is usually a good sign, but watch the stock price as well. A volume of a million is not much if the shares cost a thousandth of a penny each. Volume is very important and you should always look at a stocks average volume before trading it.
When dealing with penny stocks, you need to look out for news. News and the anticipation of news, are the biggest price movers. A lot of “pinksheets” do not have to file a lot of paperwork like normal stocks do and it may be hard to tell where the company is a lot of the time. This is why when a penny stock releases news it immediately becomes a huge deal. Good news followed by a good pump, may shoot a stock price high into the air. When the stock price goes up, then it is a good time to sell. Penny stocks usually shoot up and go back down in a short amount of time so it is a bad idea to wait for too long. Find the peak, and sell as soon as possible.
Stock trading is risky business, especially penny stock trading. The more of a risk something is, the higher the reward. You need to only invest money into penny stocks that you know you can afford to lose. Do not invest your life savings or some obscene amount of cash. When you first start out, start small. Once you start to get the hang of investing in penny stocks, you may feel safe to invest a little more. Only then is it a good idea to do so. Penny stock trading can be extremely rewarding, but there is a lot to learn out there and it is vital that you learn from both your mistakes, and the mistakes of others. The market has no sympathy for those that lose money and you will not get any breaks. Make sure that you know what you are doing and do not blatantly buy a stock just because somebody tells you that it is the next big thing.
