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 Trading Penny Stocks

 

When trading penny stocks there are many factors to take into account. That being said, there are a few basic principles that can be used to make the chances of success much greater.

 

The 10 tips below will in no way guarantee that you’ll make money, but they can assist greatly in minimizing your risk.

  1. Do not put all your investment capital into penny stocks - Penny stocks are very risky. There is a chance, as with all investments, that you may lose all of your principle. Diversify.

  2. Do your research before trading penny stocks - Do not trade a stock just because a web site picks a stock or does a profile on a company.

  3. When trading a penny stock, always select a price point at which you will sell - This will assist you in avoiding the emotions and greed that can arise when a stock price starts climbing dramatically.

  4. Make sure you use a stock broker that is "penny stock friendly" -  Many online brokers will charge a per share trading fee. Instead, look for a broker who has a fixed trading fee regardless of the number of shares you wish to trade.

  5. Never use a market order to purchase a penny stock - Always use a limit order. This way your order can’t be manipulated. You need to control the maximum buy price or the minimum sell price at all times.

  6. Monitor your penny stock investments on a daily basis - Penny stocks are not like your typical long term investments. Things can change at any time and price swings can be drastic. Don’t just check your investments on a weekly basis or you may get an unpleasant surprise.

  7. Don’t get emotional - Only invest what you are comfortable investing. It’s pointless to invest money if you’re always stressed about the stocks performance or the possibility that you may loose your money altogether.

  8. Get involved in message board communities - These mediums can give you ideas on investing, opinions on different companies, and much more. Don’t forget to validate anything you hear of importance, because there are no guarantees that people are telling the truth.

  9. Avoid stocks that have very low daily trading volume - These stocks are ideal pump and dump type stocks where you can lose all of your money.

  10. Don’t chase a stock upwards - If you try to buy into a stock that's climbing, chances are you will get burnt. There could be a sell-off that will leave you holding the bag.

 

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