Penny stocks are a great way to make money from an investment, but the risks are also very high. When you decide to go "Beyond the Brink" and buy penny stocks, there are some things you need to know.
Even if you've been burned by penny stocks in the past or have never invested before, the following ideas are meant to give you an instant and significant edge over all those traders who aren't as smart or as experienced as you are. After all, for someone to make money in stocks, they usually have to lose money. Which side of the fence do you want to be on?
Glass Jaw
Penny stocks have helped a lot of people make a lot of money. A lot of other people have also lost a lot. What's the difference between a micro-cap trader who does well and one who always loses?
Uses the research and stock picks of professionals. Does what they need to do. Observes patience. Learns from trades and stock activity in the past. learns from what other traders do. Chooses from 10 stocks at once.
Uses tips from work, rumours, and what people call "inside scoops" to choose stocks. Doesn't look into the company's finances and position. falls for bad feelings like greed, anger, and desperation. Repeatedly makes the same mistakes. looks at one stock on its own and how it is doing.
So Let's Learn
The fact that you took the time to look at this feature shows that you have the traits of a successful trader, like being willing to learn from experts and other traders' experiences.
So let's learn. As was said above, when looking for a new stock to invest in, you should always look at groups of stocks together. For example, you could make a chart and write down how much money each brings in. In the next column, write down how much you made. After that, use each of the other criteria that you think is important. With all of the information in one table that you can see at a glance, it's easy to see which one or two companies in your pool of possible investments are the best ones.
But keep in mind that stock prices don't always move in the same way as the fundamentals of a company. For example, there's no rule that says the stock of the worst company on your list can't do better than the stock of the best company.
For this reason, you should also include things like how volatile the market is, your opinion of a new product that could be a game-changer, possible good press releases, etc. This method isn't meant to tell you which stock is the best, but to help you figure out which few are the best and which few are the worst based on how much weight you give to each factor.
Available Advantages
Find an inexpensive broker. You can keep an eye on your portfolio online, do research online and off, and make trades online. Embrace technology, because it's better than everything else in every way. For about $20, you can screen stocks, compare them with charts, get instant access to corporate press releases, read up on the latest industry news, and then place your trade.
Then you can check to see if the money and shares changed hands, see how the stocks are doing, and get instant alerts when press releases come out. It really is endless and complete, and each step you take to the fullest puts you one step ahead of other traders.
Keep small amounts of money in each stock and only "risk" money on penny stocks. Even though these low-cost, risky investments can sometimes lead to huge gains, their prices tend to move all over the place.
In a similar vein, if you get "scared" or worried about a stock you own, you might want to think about selling it. Try to invest in solid penny stock companies that have low share prices not because they are having business problems but because they are small or not well known.
Be sure to read our related articles, "Falling in Love," "Fools Rush In," and "Trading Myths," as well as the "Choosing a Broker" section of our "Tools" section.
After that... and beyond
There are a few things that many of the most successful traders do the same way. First of all, they have made some very bad trades in the past. But they learned more from these mistakes than from any of the great trades they made. Don't waste your time trying to forget about your mistakes.
Second, keep a journal with the dates, the amounts and prices of each trade, and even the stocks you thought about buying but didn't. As you get more experienced as a trader, you can use this in a hundred different ways, such as to see what chances you missed, to see if your strategies work, or just to track your progress from month to month as you learn more.
