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Penny stocks for beginners – 9 Invaluable Penny Stock Tips
If you want to learn about penny stocks, then you have come to the right place! In this business, as I’m sure you are aware, knowledge is everything. In this article I have summed up the basics of penny stocks for beginners to give you a good background to the subject.
So, here are my penny stocks for beginners tips:
1 – There is more than one definition of what a penny stock is. On large stock exchanges this is anything that sells at less than $5 per share. It can also be defined as stocks with a value on the market of less than $200 million. Most people’s definition is, however, any stock trading 99 cents or under.
2 – With penny stocks, you are trading low value companies, about which there is less information as penny stock company’s are not required to have their information independently audited. It is best if you have some insider knowledge into the company you want to invest in.
3 – Penny stocks carry more risk than normal stocks. This is because the stock price of such low valued companies are easy to manipulate. Unlike, for instance, a $50 billion company, a $20 million penny stock company can have a significant proportion of it owned by a group of individuals, who can raise and lower the value of the stocks to suit their needs.
4 – Penny stocks might be cheap, but with the risk being very high, they should be allocated in the “high risk” section of your portfolio. A small rumor about a company which gets around the net can drastically affect the penny stock price. They are best for people who have the time to put into the research and trading process (day trading penny stocks can be the most profitable method, but this is a job unto itself).
5 – Beginner investors in penny stocks need to be aware of the big penny stock scams (For more on penny stock scams click here.)
). The biggest one is called the pump and dump. Put “pump and dump” into your search engine to read more about this. Needless to say, many an experienced investor has lost out to these scammers.
6 – With penny stocks you should be looking at short term trading (for an article on short term investment strategiesclick here)
)rather than to holding stocks for a long period of time. The longer you trade, the higher the risk of scammers coming in or bad information about the company being released.
7 – With penny stocks, you can use traditional technical analysis such as studying stock charts (to learn more about stock charts,click here), and fundamental analysis such as studying the financials to assist you in finding a good penny stock.
8 – You should subscribe to a quality newsletter that can provide you with stock alerts ever day. Penny stocks is high risk, but can bring high rewards, so you need to have a professional guide with you.
9 – The best way to trade penny stocks is through an online account, although you will still need a discounted (not full service) broker, who will give you competitive rates. You can also trade through an offline account, using a full service or discounted broker. For an article on the best penny stock brokers, click here
So, beginner investors, I urge you to stride forth and test the waters with the penny stock market! Keep in mind that phenomenal returns ARE made this way, and if you do enough research there is no reason why you should not be getting a slice of this pie.
Read about the top ten biotech penny stocks here.
The information supplied in this article is not to be considered as medical advice and is for educational purposes only.
|Penny Stock Trading7 Feb 2011|