Penny Stocks For The Small Trader: Part 1
Penny stocks to some are vehicles of fast money. However most lose their shirts investing in these fast paced stocks. For every investor that makes a fortune in penny stocks there are five times that that lose everything, so why the fascination with penny stocks?
Maybe for the same reason people play roulette or poker, because the fun outweighs the risk to some. There are ways of improving your odds of gaining big returns. You would be surprised at the money making potential in penny stocks, all you need is a few tips.
First you must be committed to work on your part although not as much work as you may think. There is no better feeling than watching your penny stocks soar and your profits go up as well. Sometimes you can make a month’s salary trading penny stocks inside of just a few hours of work. Other times you could turn a few dollars into a nice down payment on a house. You simply need to understand their workings.
It would be foolish to think that you cannot lose with penny stocks. You can purchase $500 in penny stock to have them become worthless, losing your entire investment. On the other hand the same investment can $100,000 or more or anywhere in between. The beauty of penny stocks is that you can only lose your original investment, but your profits are limitless.
What is or is not a penny stock depends on with whom you deal with. Some companies consider a company with less than $10 million as a penny stock where others consider a company with less than $20 million as a penny stock. The definition of a penny stock per say is, “Any stock trading less than $5.00 per share.
This definition is what most people trade by. You determine what your definition of a penny stock is and follow through with that sentiment.
In many cases, penny stocks are considered to have high risk and high potential than conventional stocks. You will be lucky to find a broker who deals in penny stocks because they are either unable or unwilling to do the work necessary to predict what these stocks will do. Some brokerage firms may even consider them beneath them to deal these stocks.
Trading penny stock when you have made a 20% gain can be foolish. These stocks can trade in 100’s of percentage gain before hitting a plateau not the 10’s of percentages. Of course the larger the company, the larger the predictable revenues and earnings will be. In most cases it is not possible to calculate the actual worth of most penny stocks.
Some of these stocks do not have a proven product, inventory or even a revenue stream. The prices rise and fall according to demand and the demand is driven primarily by speculation.
Penny stocks lack the mass of market activity to enable technical analysis like larger volume stocks have. Penny stocks often have drastic price swings. Many times these swings may be due to nothing more than a large buy or sell order. However when a company comes out with a significant press release, expect the prices to soar.
For Example: if a drug company comes out with a new drug, prior to release of the drug they inform the press. This gives investors time to buy in large quantities. This could give the shares a jump of hundreds of percentages in just a few short hours.
Many stocks in their “infancy stage” or the beginning of a company’s ground floor, are called “story stocks” because they have the investors interest and because of their potential.
This means the company has a great story or product but has yet to prove its worth. At this point they lack the ability to capture the market and educate society about their product.
Maybe for the same reason people play roulette or poker, because the fun outweighs the risk to some. There are ways of improving your odds of gaining big returns. You would be surprised at the money making potential in penny stocks, all you need is a few tips.
First you must be committed to work on your part although not as much work as you may think. There is no better feeling than watching your penny stocks soar and your profits go up as well. Sometimes you can make a month’s salary trading penny stocks inside of just a few hours of work. Other times you could turn a few dollars into a nice down payment on a house. You simply need to understand their workings.
It would be foolish to think that you cannot lose with penny stocks. You can purchase $500 in penny stock to have them become worthless, losing your entire investment. On the other hand the same investment can $100,000 or more or anywhere in between. The beauty of penny stocks is that you can only lose your original investment, but your profits are limitless.
What is or is not a penny stock depends on with whom you deal with. Some companies consider a company with less than $10 million as a penny stock where others consider a company with less than $20 million as a penny stock. The definition of a penny stock per say is, “Any stock trading less than $5.00 per share.
This definition is what most people trade by. You determine what your definition of a penny stock is and follow through with that sentiment.
In many cases, penny stocks are considered to have high risk and high potential than conventional stocks. You will be lucky to find a broker who deals in penny stocks because they are either unable or unwilling to do the work necessary to predict what these stocks will do. Some brokerage firms may even consider them beneath them to deal these stocks.
Trading penny stock when you have made a 20% gain can be foolish. These stocks can trade in 100’s of percentage gain before hitting a plateau not the 10’s of percentages. Of course the larger the company, the larger the predictable revenues and earnings will be. In most cases it is not possible to calculate the actual worth of most penny stocks.
Some of these stocks do not have a proven product, inventory or even a revenue stream. The prices rise and fall according to demand and the demand is driven primarily by speculation.
Penny stocks lack the mass of market activity to enable technical analysis like larger volume stocks have. Penny stocks often have drastic price swings. Many times these swings may be due to nothing more than a large buy or sell order. However when a company comes out with a significant press release, expect the prices to soar.
For Example: if a drug company comes out with a new drug, prior to release of the drug they inform the press. This gives investors time to buy in large quantities. This could give the shares a jump of hundreds of percentages in just a few short hours.
Many stocks in their “infancy stage” or the beginning of a company’s ground floor, are called “story stocks” because they have the investors interest and because of their potential.
This means the company has a great story or product but has yet to prove its worth. At this point they lack the ability to capture the market and educate society about their product.