The one thing that is known about penny stocks even to people who are not investment gurus is that they are cheaper than the other stocks. The stocks can trade even below $5 for every share, and they are also not regulated. The main reason why the penny stock is low-priced is due to its low value.
While that is the case, it does not mean that you cannot make a killing from trading penny stocks. Thrill-seeking investors have had a successful history trading penny stocks by taking advantage of even the slightest adjustments and making quick sales.
Investing in penny stocks is pretty simple as it does not require you to use a lot of money. However, the risk of losing money is high, and that is why you need to understand how to trade penny stocks.
As earlier highlighted, the investors who profit from penny stocks are the ones that sell quickly to take advantage of even the slightest price adjustments. As an investor, you should therefore not be waiting for a time that you will get 100% returns to trade. Watch out for any price fluctuations that are in your favor, trade, and move on swiftly. Usually, investors get about 30% returns from trading penny stocks.
Focus on the high-volume penny stocks
To get the most out of trading penny stocks, it is best that you stick with the ones that trade with high volumes. A good example is the penny stocks that trade at a minimum of 100,000 shares in a day. Anything below 100,000 in the volume is not liquid enough to benefit your investment. Experts also advise that you trade shares that have a price higher than 50 cents per share. Looking at the volume and the cost per share will help you determine the penny stocks that are liquid enough to bring something to your investment.
Do not buy penny stocks like they are lotto tickets
Unfortunately, this is something that most investors do. Buying and trading penny stocks as a result of motivation from success stories will only frustrate you. Most of these stories are not true, and they are pure scams. Ignore the success stories and say no to anyone trying to convince you to trade them.
When investing in penny stocks, the only person you can trust is yourself, and the only guidance or motivation you need to trade should be determined by the volume of the penny stocks and their price per share.
Invest time and effort
Just like in other areas of life, an effort is required for successful investing in penny stocks. This means that you should be waking up an hour or two before the markets open and analyze the market, including previous trades. Identify what went wrong in the trades and identify the types of penny stocks that sold well.
Time and effort will be needed to hone your craft, especially if you are just getting started. Penny stocks trades require a hard worker. Do not be in a hurry to trade before you learn: learning must come first, lest you will have to deal with losses.
Set a limit order
When buying or selling a limit order, it is always advisable to set a limit order. The limit order spells out what you will be willing to pay for a stock. Why is it important? The amount of shares available for trading penny stocks in the market is usually thin, and it also helps limit your trading commissions.
By setting limit orders, you will be able to trade penny stocks even on the days you are not there to monitor.
Keep a cool head
Just like in any other investments that people make, you are advised to remain calm even when you lose while trading penny stocks. This will prevent erratic and revenge trading, which will only lead to you incurring even more losses. It would help if you kept your emotions in check when trading penny stocks.
Stick to your trading plan
As aforementioned, you should first learn before you trade and also take the time to create a game plan. Therefore, it would not make sense if you invested all that time in creating a game plan, only for you to not stick to it. A plan will lead to perfection and success in investing in penny stocks.
Most investors fear working with penny stocks due to the fear of loss. However, with the right strategies, this should be a lucrative investment. Be ready to invest time in research and learning and formulate a strategy before you get started. When looking for penny stocks to invest in, focus on qualifications such as liquidity, trading volume, and volatility. The strategies above are ideas to get you started in your journey of successful penny stock investing.