How To Get Into Penny Stock Investing

investing in penny stocks

Penny stocks are sometimes called the slot machines of the equity due to the different consequences involved. The lure of penny stocks is that they don’t cost much money but can give you a much greater return on your investment.

If you plan to invest or trade penny stocks, you should be well educated in the market or you will lose your money in the process. Getting lucrative profits in this business is definitely feasible if you understand how penny stock investing works.

Unfortunately, odds won’t favor you if you don’t have a good foundation as many scammers and manipulators (those who know the game better), rule the game. Always remember that penny stock trading is a business.

This means that you should analyze your profits and losses. If you have established a pattern on this, it will make a lot of things easier and manageable. You should know how to read balance sheets and cash flows among others.

How To Invest In Penny Stocks For Beginners

A simple tip in investing in penny stocks is to plan in successful strategy is the very first thing everyone has to have when it comes to trading. Once you have created a strategy that perfectly works for your interest, make an attempt not to waver from it.

Meaning, no one must have any second thoughts. This kind of second guessing mentality often results to countless traders losing more money than earning.

The next is the misconception most people think that good penny stock trading for beginners is all about having strong instincts. Which is definitely not true therefore, you should make decisions that are based on:

  • Experience
  • Knowledge
  • Good Sound Logic
  • Data

This is not about what your heart is telling you. This is more of what you have in mind. Last but not the least; don’t do things simply because everybody in the industry is doing it.

In the event that everybody else has jumped on a “hot” stock, then there is a high possibility that there is little money left to be made if you are going to do the same thing.

As a matter of fact, stocks would probably drop down or plateau in a price within a short time. By following these tips on how to get into penny stocks, you can certainly find the best penny stocks to buy and hit financial success in penny stock trading. It just needs patience and good logical thinking in order to avoid mistakes.

How Much Do You Have To Invest In Penny Stocks

Set aside enough savings to last you in three months as a precautionary measure. Just like larger stocks, penny stocks are risky business too. They are the most manipulated and most volatile investment in the market. This is because companies have no history of solid financial performance making them high volatile penny stocks. 

Identify Which Cheap Stocks to Reject: This will include companies that have revenue of less than $10 million, stocks that are not included in any of U.S. major exchanges, companies recommended by emails and companies that you don’t understand well or you don’t like. Also, avoid companies that are heavy with debt.

Penny stocks are oftentimes sold compared to being bought. Hence, it is best to discard the tips from your emails and newsletters. Read the disclaimers instead as promoters are paid by investors to create the hype.

In trading penny stocks, you should know when to quit as this may change the course of your investment. Trading penny stocks requires ample knowledge towards financial management as well as accounting, economics and business. You don’t need to be a certified accountant but it will surely help to have a vast knowledge in the subject.

How To Buy Cheap Penny Stocks For Beginners

Buying penny stocks even for beginners is not very complex. But it does has several steps to be learned. The following steps demonstrate how to buy penny stocks for beginners.

Using an automated screening device helps you to find a list of good penny stocks to buy.

This ensures that you don’t waste time trying to look for them elsewhere. The best aid that you have in the automated screening option is the Bing Finance, which is one vital stock screener. Bing Finance screens through companies that are not listed on main exchanges. The other screener worthy of mention is the Counter (OTC) Markets.

You will be able to filter stocks based on the book value or growth or dividends or cash flows. You can also benefit from Support and Resistance Levels on Charts.

This can assist you; although it is complicated. This is normally complex unless you know what exactly to do in these cases. The safest way to buy here is to look at the trend for a period of not less than 6 months. Moreover, you should buy when the stocks are low and sell when they are high.

The other way to buy is by looking at the liquidity which translates to how many shares a company trades. This in turn shows how liquid a company is. It is because the number of shares traded by the price of one share gives the turn over for the day. Investment here needs proper analysis.

Your decision to buy should be based on how well the company is performing. When buying penny stocks, it is always a good practice to acquire them by looking at two indicators – that is, the price and the volume. These are two parameters that determine how the trade is doing.

It is a very tough subject to follow. Just by observing the trend of these two parameters helps a lot. When one is going up, the other one is going down. By keeping a closer look at them, you will be able to ascertain the best position when you need to buy.

If you desire a mentor or guide in your penny stock trading experience. I would recommend Mr. Matt Morris he runs a penny stock service for beginners and experienced investors. His popular service is called Microcap Millionaires click here for more info.

Author: Matt Hill