Penny Stocks for Dummies: 10 Tricks to Learn

Penny Stocks for Dummies

This penny stocks for dummies article will talk about common mistakes beginner penny stock investors make and help you learn tricks that penny savvy investors use to avoid them. If you have never traded penny stocks, understanding the basics of penny stock investing will help you get started.

1. The most important penny stock for dummies trick you can learn is to never invest more money that you can afford to lose right from the start. The penny stock market is a highly volatile trading place where stock positions can change drastically within a day, so we definitely do not recommend cashing in your 401K to get going with penny stock investing.

2. Contrary to what you might have read or heard, we do not advise you hire penny stock brokers due to their higher than average commissions and multiple fees that might be eating into your penny stock earnings. Instead, choose a discount online trading place that will allow you to trade penny stocks at minimal costs. Penny stock brokers are getting paid commissions regardless of your financial gains or losses, so, in reality, they are not success driven.

3. Many penny stock fortunes scammers literally prey on dummies or inexperienced investors luring them into their well advertized penny haven promising unbelievable gains. In reality, knowing that penny stock market is easily manipulated by penny scammers will help you avoid such situations where you can really lose your shirt. Therefore, never ever try investing in penny stock picks offered to you through e-mail or through “free “penny screening websites. At times, such websites are sponsored by penny stock fortunes scammers that are trying to artificially raise penny stock prices and exit the market with your money in hand.

4. The next trick is knowing how to compile your first list of penny stocks to watch. This is tricky if you have never done it before, you should definitely get help with your first picks by getting a subscription to a reputable penny stock publication or a penny screening website that provides novice investors with daily stock picks. Again, you must find a reputable source for penny stocks advice.

5. Once you compiled your first preliminary list of penny stocks to watch, concentrate on the penny stocks that are currently trading at a minimum of $ 0.05 and a maximum of $2.00 to ensure good liquidity levels. Discard any penny stocks that do not fall into these categories.

6. One of the most useful penny stocks for dummies piece of advice is to avoid stocks that trade in volumes less than 100,000 stocks per day, anything less is considered to be of low liquidity. Should the prices for these penny stocks start coming down, chances are there will be nobody willing to buy them from you.

7. Never invest in a list of penny stocks from the same industry or field in case that particular industry starts experiencing difficulties causing penny stock prices to collapse. For example, do not put all of your penny stock money into gold, pharmaceutical or green areas of the market in case they take a downturn dragging your entire portfolio with them.

8. Focus your attention not on the actual stock but the company behind it. Do you know what they are currently working on, what innovative products, technologies or services they are introducing to the market, are their sales continuously increasing? The best penny stocks for dummies trick is looking for these markers in each penny stock company.

9. Knowing when to sell will either make or break your penny stock investing experience. Penny stock trading is at times compared to gambling due to their high volatility and lack of performance history. This knowledge will not come overnight but with experience you will soon be able to tell which the best exit points for particular stocks are.

10. Our final penny stock for dummies piece of advice has to do with staying informed with current market trends and overall events in the penny stock market. Make it a daily routine to scan through publications or online sources giving you information and news release coverage on penny stock activities.