Penny stocks, also known as microcaps, are stocks that trade below $5.00 on stock quotes outside of the major trading networks. These stocks are highly speculative, offering investors the opportunity for big gains and big losses. These stocks are subject to less stringent filing and disclosure standards, so identifying legitimate penny stocks can be a challenge for even the most experienced and savvy investor.
In order to find amazing penny stocks, you must follow the same principles of more traditional stock trading. First, do your due diligence. Research the company’s business model, financial stability and liquidity. While no one can predict the market, you can identify certain market trends and potential for growth. The same high-yield growth area that traditional investors seek will also work for these stocks. Technology, electronics and back-end platforms could be big growth areas for these stocks next year. Talk to other penny investors and find out what stocks and companies are making them money. Many stock trading websites offer access to the portfolios of some of the most successful and aggressive investors, so you can see who is really putting their money where you want. Chat rooms and discussion forums are fantastic opportunities to get feedback, advice and opinions from other money share traders. Without the help of a broker, you’ll have to rely on your own research, conversation, and intuition to make a profit in the penny stock market.
These stocks are an attractive option for investors who can handle high risk. Limited liquidity, size, debt and insufficient disclosure of general financials can make trading these stocks a roller coaster ride. Since you will be buying and selling a large number of stocks, you need to know exactly what your profit and loss strategy is. Make sure you have a clear and well-defined stop order so you can exit the stock if the price starts to fall.
These stocks are not as tightly regulated as traditional stocks. Make sure you know exactly where you are investing. Ignore or pay little attention to investment advice and promotions you receive via email, Facebook or Twitter. Do your own unbiased research before investing. There are a number of sites online that do micro load stock research, but be wary of advice from message boards and blogs where authors may be compensated for their work. There are several websites that provide hot tips on a daily basis. Use these guidelines to identify some great promotional opportunities. You can learn a lot from where your peers and colleagues invest their hard-earned money.
To build a great penny stock portfolio, make sure it’s diversified. Invest in a number of different companies, keeping your investment in each company under 20%. Losses and gains can add up quickly, so be aware of your portfolio. Being a successful penny stock investor takes discipline and research, but if you’re committed to it, you can expect high returns on your investments.