When you want to invest in penny stocks, you need to set the rules and follow them, just like all the big investors have done before you.
Big-time stock traders and investors have always followed the rules and started out small or even very small. They have sworn by a set of rules that basically says they won't keep losing money by making the same mistakes over and over again.
Losing money instead of learning these rules is not acceptable and could be disastrous for a new investor, even if your brain is telling you, "Hey, what does it matter? They're just Penny Stocks!" (Damn you brain!!)
But if you follow a few simple rules, you'll be ahead of the game when it comes to investing in penny stocks.
First and most important: NEVER, EVER, UNDER ANY CIRCUMSTANCES, borrow money to invest. This could be the most important rule to follow to stay out of trouble with investments.
I do know! You think you have an advantage because you know some "insider" information that could help you build a big portfolio quickly.
So have thousands of other people before you, and they were all WRONG!
Please don't get excited about a story where the only way out is to borrow money. If you start to lose money on the stock market, you will have to pay off your debts right away. Trust me, if this happens, you're in a lot of trouble.
Even if you start to make money, you will use it to pay back the loan instead of saving it or putting it into something else. As long as you keep trying to make a living trading stocks, this money will follow you around and make you feel bad.
As a general rule, you should always save up so you can invest. If you chase debt until you catch up, you'll end up further behind than you were before.
DO NOT DO THAT!
When investing in penny stocks, one important rule to remember is to put your money into companies that make money. I know that sounds and reads like a lot of nonsense and a waste of time, but trust me: sometimes people just invest in a company without checking to see if it will make money or not.
Either they like the name, or they like what the company sells or does, or they know the cousin of the manager of the typing pool and think it's good to keep business in the family.
Don't be the fool who buys a stock and then turns on the TV or goes online to see that its quarterly earnings are down and its revenue per share is dropping like a four-ton boulder of the Empire State building - very hard and very fast!).
You can easily find information on the Internet about how to find a profitable company, and then you can choose which one to invest in. There are many guides on how to evaluate companies, their financial statements, and their markets.
Also, do all of your homework, research, and analysis before you buy a stock that isn't getting much attention.
Volume is one of the most important things for investors to look at. Anything less than one million shares per day is not worth touching. Buying a stock that trades 9,000 shares a day is a waste of time because it will be nearly impossible to sell it when you want to.
For stocks to be liquid, which means they can be sold, they need to be looked after and have value. Don't get stuck with a stock that is going up and you can't sell. Don't just think about how much money you'll make; also think about how you'll be able to make that money. Even if you've made $1.20 per share in three months, it doesn't matter if you can't sell them.
Oh, and just so you don't forget! DON'T BORROW MONEY FOR INVESTING!!
