How To Pick Penny Stocks If You Are A Novice Trader?

How To Pick Penny Stocks

If you are new to trading stocks then understanding how to pick penny stocks is crucial unless you are willing to take large risks and deal with a number of losses in the beginning. As a new trader you are probably in the dark about the penny stock trading market, how these investments are traded, and how to find the right penny stocks for your investment portfolio and goals. Learning how to invest in penny stocks is not difficult. You can always discuss this subject with a broker or financial adviser or you can take advantage of the wide range of resources that books and the Internet offer. A broker may recommend stocks but if you follow these recommendations to ensure that there is no conflict on the brokers part. Some brokers receive a commission for directing clients to a specific stock regardless of the true value of the company. Listening to an unscrupulous broker could leave you with low quality or worthless investments while the broker gets rich.

Learning how to pick penny stocks means learning how to research the underlying company and evaluate the past performance of the stock. The first step is to locate suitable penny stocks that may make a good investment for your circumstances. You can sign up for newsletters that contain the best penny stock picks, use the Internet and search penny stock websites, and use other methods to locate potential penny stocks. Once you have your list of possibilities you will need to research all of the company information that you can find for the stock. Look at the sector and business of the company, and the past performance for the stock. Some penny stocks will not have historical data available because the company is new.

Once you know how to pick penny stocks that show potential using thorough research you will need to compare each stock to see which ones in your list will fit best with your investment goals, strategies, and objectives. Many stocks in the penny stock market have very low levels of liquidity and may be difficult to sell when the time comes, and others may involve risks higher than what you are comfortable with. The end result of this process is a short list of penny stocks that are ideal for your portfolio and investment strategies.

It is not difficult to learn how to pick penny stocks even if you do not have any experience in this area. The Internet is full of free resources that cover every aspect of penny stock trading, and all you have to spend is time if you want to learn everything there is to know about this subject. The vast number of penny stocks companies include some high quality stocks that are excellent investments, but also many losers that will never amount to anything. The key to successful trading with penny stocks is knowing how to tell the difference between these two types of stocks. It is recommended that all new traders use a dummy account to get used to the market before actually risking any investment capital.