Nothing is as risky as investing in an area you have little knowledge in, one that is infested with all types of scams and trickery but yet its where the money is.
Dealing with penny stocks can be tricky, and often traders end up making big losses if they are not very cautions and careful. Below I will give you the tricks and tips that could help you make your penny stock trading quest a success, without making losses of any kind;
1. Take your time and carefully look at the chart over half a trading period and see and analyze the trends of the stocks. Avoid stocks that go up at the early hours of the trading period. If it goes down, pick on that one and major on it. This will leave you if not making some profit, then very minimal losses.
2. Avoid risk and fraud: learn to tell what is false and what is wrong from the media. Look at news and avoid fake newsletters that promise and predict how a certain stock will go up. Avoid the cheap speculations in chat rooms and be able to tell what is risky and false information that can lead you to trading wrongly.
3. Avoid Small time dealers and companies. The fact is, these companies rarely pay large dividends. Theoretically, this company may be the best and they do so by reinvesting in the dealings. This leaves small disbursements to the investors posing a huge risk to the investor.
4. One thing to note for anyone coming in as a beginner is that you should be very cautious and careful about penny stocks trading at $1 and anything around that margin. The truth is that these are very hyped and you are almost sure you can afford these as they are cheap and often available. As much as there is a possibility of making a huge profit here with these and it may seem like a gold mine you hit by buying these stocks, they can also be the most misleading.
5. Don’t invest in penny stocks if you have a limited budget. Chances are that you will end up losing out and making losses. Have a good budget first, make sure you have a solid investment that you can risk at any time. The reasons that the experts at the stocks market advice you to avoid penny stock trading if you budget is little is that the risks here are very high. It requires high investment ability and knowledge to work your way around this and make a profit. There is limited information, low levels of liquidity and several risks no one might warn you about that are involved.
Basically those are the major principles and rules that a trader can use while trading penny stocks to ensure that they do make a profit in this lucrative market. Used well, they can bring in some handsome profits, but the ignorant will always make serious investment flaws which could be avoided anyway.