trading penny stocks

Tips for Trading Penny Stocks

Penny stocks could be defined as securities issued by small companies, with each share usually trading at less than $5. Although they are generally sold over-the-counter, they may also be traded on the various security exchanges, which may even be the foreign security exchanges. One thing about penny stocks and which lures many to transact in them is that they do not cost so much yet carry with them promises of making the traders a fortune. However, trading in these stocks may be an easy way to suffer losses. The good news is that you can avoid such failures by getting crucial information from this site to trade these securities.

Here are some of the crucial tips for successfully trading penny stocks:

Liquidate Them Quickly

liquidate the quicklyAmong penny stocks’ main attractions is that you could get between 20% and 30% gains in a few days. If you do your calculations and realize you can make such kinds of returns, it would be best to sell them soonest possible. Nevertheless, many investors let greed take them over and start eying 1000% returns, and they may end up losing or not getting so many gains. It would be best to have in mind that the penny stock you are holding may be getting pumped up, and it would only be prudent to get any profits and get on to other things.

Concentrate Only on High Volume Stocks

You need to learn the trick of getting out of your position, and that is only sticking to stocks that trade huge volumes every day. And high volumes mean anything from 100,000 shares per day. The penny stocks trade expert Sykes advises that you know how many shares are sold and the dollar volume. Additionally, this guru suggests that you only deal with those priced above 50 cents per share. The reason for that is that stocks whose daily trading volume is less than 100,000 and each share is under 50 cents may not be adequately liquid to engage in.

Buy Stocks of Profitable Companies

buy only profitable companies' stocksIt is better with penny stocks like any other equity investment to limit yourself to only profitable companies. The argument for this is that it would be easier to liquidate the securities, as is the case, with any publicly traded shares, which justifies you taking the risk to invest in such shares. The ability to cash out the stocks supersedes the promise of future gains.

On top of the above tips, it would be best to buy stocks of a company whose business you can explain or understand well.…