Penny stocks are low priced stocks listed by small companies. It is very easy to invest into these stocks as they don’t cost much and promise a big profits but trading these stocks is also a good way to lose money.
Although these stocks are low priced but low liquidity ensures high volatility. So, it is advisable for small investor to invest with cautious and get clear understanding of the company’s business and its financials.
There are few rules listed below, can be followed while investing into penny stocks:
- Ignore penny stocks success stories: Investor must try to ignore the penny stocks success stories which are touted on emails, SMS etc. The investor must invest into penny stocks with caution and not play as a gamble and loose instead must focus on profitable penny stocks with solid earnings growth and those making 52 week high.
- Disregard the tips: The tips send via email, SMS, newsletter, fake press releases are just manipulations to sell those penny stocks rather than buy. Many big investors dump their stocks are high price by creating manipulations and trapping the small investors into it.
- Sell it Quickly: it is advisable for small investor to sell quickly if he is getting 20%-30% returns in just matter of few days rather than getting into greed to get more returns, because they are volatile and fall back more sharply.
- Never Short Sell: Investor must not short sell these penny stocks. Any positive news although fake can make stock shoot up 50% or even 100% in just a matter of few days and leaving shorting to pros.
- Focus high Trading volumes: These penny stocks are illiquid in nature. Focus on stocks which have high trading volumes on consistent basis rather than average basis. Consistent high volumes will ensure investor able to sell his holding any moment.
read more ways to invest at http://www.barisera.net/penny-stocks-ways-invest-part-2/
The ways to invest into penny stocks are continued in this article and they are as below:
- Don’t Listen to the Company’s management: It is advisable not to trust anyone while investing into these penny stocks. The companies are trying to get their stock up so they can raise money and stay into business. So investor needs to be cautious and follow the data from authentic source.
- Use Stop Loss: These stocks are illiquid and highly volatile. Investor need to put a strict stop loss trading into these penny stocks because they can fall and rise as much irrespective of the market sentiment. For risk reward in your favor, aim for 3:1 or 4:1 instead 1:1. It means if you target one dollar upside for a dollar stock than stop loss must be at 20 cents to be at better risk reward ratio.
- Buy the best of the bunch: An investor while choosing the penny stock must ensure the stock is on an uptrend. Better buy the stock which is trading at its 52 week high and that too at consistent high volumes. It is easy to find the stock fulfilling these two parameter but need to ensure that the stock is not a pump and dump scheme.
- Don’t trade large positions: Investor must be careful not to trade the penny stock in large quantity of shares. It is very easy to get in and difficult to get out of the penny stocks due to lack of liquidity. Investor need to ensure that not to buy more than 10% of the stock’s daily volume.
- Don’t love the stock, only Trade: Every penny stock company wants investor to think that it is an exciting story that will revolutionize the world. Most investors fall in love with the stock while it is going up and don’t sell them until it fall back.
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Nathan Gold was a teenager math expert who excelled in the stream of picking up penny stocks. He gives tips to the experts by sharing his views on the particular high-end stocks. The system followed by him is simple and designed in accordance to every trader in mind. It is even great for the beginners and experts also follow the tips and pick to get better responses. The major aim behind finding the best penny stocks is to gather all the data and find out the most preferred stocks among the listing of thousands of stocks available on pink sheets and OTCBB.
Unlike the advertising or marketing newsletters, Nathan’s newsletter advises you to make the trade in a week. There is a fair reason behind his suggestions are the strength of people trusting on him. The people who invest in those stocks have the probability to get extension in them. There are many examples revealed for the success of his newsletters.
Features of Penny Stock Egghead:
- There is no repetitive subscription fee and you are required to pay for one time and you’ll be set for the whole life.
- The returns are rapid for most of the cases. People usually make profits with the tips within a few days.
- You can even get direct interaction with Nathan Gold, who is himself the best advisor. This person is highly concerned about his reputation and status and makes sure that even a single customer is happy with him in all the aspects.
- You can rely on the stock picks given by Nathan, but it doesn’t mean that your own homework is not necessary. Taking help from his tips is good, but you can’t rely on them completely without making your own efforts to seek for the best stock.
- Nathan’s expert views have been proven right for about 90% and this percentage is really high. He has attained positive reviews from many customers and utilized his skills to give his best to the penny stock investors.
- You can rely on him to get worry free from your recent investments. All of his picks are affordable and you can think about making investment with only a couple hundred dollars.
- There is one email a week sent for his latest picks and there is no spamming or useless sharing of emails in between.
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The economy has rapid changes over the last decade. People call it as the ‘Lost Decade’ due to recessional times faced by almost every industry. There are many people who’ve seen their stocks reducing and even collapsing. Those who have invested in penny stocks have majorly attained losses and people are delaying their retirements for the sake of earning. The investments have become risky, but it doesn’t mean that they will only give you losses. Fair investments and genuine companies still manage to give growth to the investors. Sustaining the position in this tough competitive world has become difficult.
Penny stocks have made people to get gains over 100-500% and the stock market is driving towards the smart investors to get the hundreds of stocks for making investment. There are people who own these stocks and give chance to the new companies for excelling in their own ventures. Smart investors give chance to the fair companies and becoming a part of the blooming industry is always the matter of pride. Your own research about the company is very important to get gains from it.
How does it work?
Doing your own research doesn’t mean that you don’t have to consider the expert suggestions. Smart investments are done by getting the best moves from the most appropriate outlook. Penny stocks can get you great money, but you need to pick up the right stocks by researching the market in the best way.
About 95-98% of the penny stocks are worthless and this is the reason for you to spend the adequate time for finding out the most reliable stock from the list of thousands of trash stocks. You can take up the suggestion and picks by the stock experts, but the ultimate decision should be made in accordance to your own efforts and study.
Penny stocks are basically substandard stocks which are not traded onto the major stock exchanges like DOW Jones or NASDAQ. These are traded on pink sheets OTC (Over The Counter) Exchanges. The stocks trading below $5 per share are categorized as penny stocks and are more risky to trade than shares of big companies.
These penny stocks chosen correctly can turn out to be a gem in future for an investor. We have seen many established and big companies shares like Microsoft, INTEL and Wal-Mart were once a penny stock in their history, but ultimately these penny stocks are a big failure. Remember, only one or two penny stocks on an average out of 200 shares result into a blue chip.click here to read more information on how to invest in penny stocks.
Here are certain factors accountable for the failure of these penny stocks and that can also be the reason why the investors fear trading into these stocks. These can be;
- Not present on major stock exchanges: Penny stocks don’t exist on the major stock exchanges. The established exchanges have certain guidelines like market capitalization, trading volumes etc, which are required for any company to get their stock listed onto these exchanges. Many penny stocks don’t meet these guidelines and are traded on OTC.
- Lack of Information: Another reason that investors often lose their money while investing into penny stocks is failure to get any reliable historic or current information about the companies unlike in case of established companies where it is easy to get the same on websites, news channels and even free analysts’ reports. The lack of information about penny stock adds to the risk of investing in penny stocks.
- Manipulations: These penny stocks are often easily manipulated. The illiquid nature of penny stocks makes it simple for operators to manipulate the pricing and even a single entity can influence their stock price movement.
Stock market investment or trading is very popular among general public. Investment in stock market is the most risky investment compared to other sources of investment as choice of wrong stock can end you in a loss or even your whole investment to get eroded.
In stock market there are some stocks categorized as penny stocks, which trade below $5 and are most risky stocks compared to the high priced blue chip stocks because these penny stocks tend to be more volatile (either side) in their price movements. They are not only prone to stock market crashes, even can crash due to nonperformance of their business.read Penny Stock failure at http://www.barisera.net/penny-stocks-failure/
On an average, only a couple of stocks out of hundreds prove to be real investment gems; else other end up proving to be a nightmare of small investors. In spite being most risky investment, there are common fallacies pertaining to penny stocks which make investor interested to invest into these stocks and end up falling in a trap.
These are as below:
- Today’s blue chip was once a penny: The fallacy for most of investor falling into a trap believes that today’s blue chip like Microsoft and Wal-Mart etc were once a penny stock. The history of most common big companies for instance like Microsoft and Wal-Mart were once trading at very low price and this makes investor believe that stock trading at $1 or only in cents will also become future blue chip.
- Positive correlation to number of shares purchased to return: Most of the investors investing into penny stocks falls to this second fallacy and feel there is more room for appreciation and more opportunity to own more stocks. This convinces the investor that these micro-cap investors are rapid and super fire way to increase profits.
Penny stocks are small company’s stock trading at very low price per share. Such stocks are high risk and high volatile trades and are subject to manipulation by stock promoters and pump and dump schemes. These stocks present a high risk for investors, who are often lured by the hope of making large and quick profits.
Despite of high risk and other notable concerns, the penny stocks are always in limelight of investors who like to make huge profits. The business of these small, young and prosperous companies has a huge potential to grow their business and hence, the stock price tend to double of even increase to three times in short span of time. People looking for earning quick money mainly prefer penny stocks.
Taking an example, penny stock trading at $5 per share can get double to $10 per share or can increase to $15 or $20 per share, but it is very difficult for blue chip stock at $1000 pricing per share to achieve 2000 level.
Penny stock investments can be a boom for the investor, but on the other hand; it is coupled with huge risk for the investor and provide equal opportunity to lose the trading equity. So, these investments must be done with lot of cautious.
Here are some tips for investors to how to invest in these penny stocks and make huge profits:
- Trading volumes: Penny stocks are illiquid in nature. It is advisable to look for stock with consistent high trading volumes rather than average trading volumes. Analyzing average trading volumes can be misleading. For example, if stock ABC is traded with 1 million shares for 1st day and no share traded for rest of week, than its average daily volume will be 2 lac shares, which can be quite misleading for investors. In order to get in and out at an acceptable rate of return, consistent volume is must to be considered.
- Efficient management: While choosing the penny stock, investor needs to analyze the efficiently of management or promoters. Many startups incur loses initially, but have the need to analyze the reason for the same. The promoters must know how to make profits in business. Researching the right company for investing lower the risk of loss of capital and increases odds of much higher return.
- Plan Entry & Exit in stock: Penny stocks are very illiquid and that is the reason they can get highly volatile in their price movements. An investor must plan the entry and exit levels for the stock and must work accordingly as volatility make stock quickly move up and move down just as quickly.
- Authentic source of information: Penny stocks are manipulated by big investors and operators. Misleading positive information and statements are spread out through various means like fake press releases, SMS, emails, newsletters etc that persuade common investor to buy the stock and when price rises, and operator dump that stock, hence trapping the small investor. It is advisable that the source of information must be authentic because right source with good analysis makes perfect choice of stock and hence result in profit for investor.