Now that you know a bit more about working with Penny Stocks, it is time to work on putting some money into the Stocks that you would like to use and making sure that you get the right Stocks that will help you to make the money that you would like from this type of investment. This chapter is going to help you learn how to get started with Penny Stocks so that you can see the profits that you want in no time.
Opening Your Account
The very first step for you to do when starting on Penny Stocks is to open a trading account. As an investor, you need to consider how easy it is for the account setup, the customer service with the account, and any fees that are associated with opening and running the account. There are times when a broker will choose a fixed rate for a smaller amount of shares but this rate can increase when you trade on more shares; depending on the type of trading that you do, this could make a big difference in the profit that you make.
The good thing about working on a commission per share idea is that it works well for investors who want to get into Penny Stocks but who don’t have a lot of extra money for it. As an investor, you will need to shop around in order to find the best brokers and the best trading accounts in order to maximize your profits so take the time to look around and talk to a few different brokers to determine which one is the best for you to get into.
Picking Your Penny Stocks
When you are ready to find a Penny Stock and make a decision, you will need to choose from either the Over-the-Counter Bulletin Board or from the Pink Sheets. You will find a list of Stocks that are available for you to purchase and you can do your research and pick the right ones. Some brokers will provide you some screening tools so that you are better in terms of picking the Stocks in line with your risk tolerance level and your investing strategy.
Since Penny Stocks are a very volatile investment, it is possible to make a lot of money from your investment, but it is also entirely possible to lose a lot of money in the process as well.
There aren’t a lot of people who invest in Penny Stocks, some of the market players include money managers, index funds, and various mutual funds, which is one of the reasons why Penny Stock market is so volatile. Since there aren’t that many investors that go with this option, you may experience liquidity problems at times. You may not be able to sell some of the Stocks that you own because there just aren’t enough buyers available who would take your Stock at all, much less at the price that you would like. You may have to take a big loss and sell them at a much lower price you would like. But there is also a possibility that these Stocks will go the other way and you are able to sell them at a much higher value than you purchased them. But it is the job of the investor to decide which way this is going to go before making a purchase of a Penny Stock.
Choosing a Broker
A broker is an important person who will help you to get started on Penny Stocks. A broker is going to be in charge of providing you with the platform that you need in order to work on your trades. They can work with you to provide some recommendations for what Stocks to purchase, as well as providing marketing and sales services for all stakeholders. They will have a lot of tools and advice that you will definitely need when you get started. Every broker that you work with will have different services and tools that you can utilize, so this should go into consideration when it comes to picking out the brokers you want to work with.
Many of the brokers you want to consider will have a good presence online and some of them will offer trading platforms that work on mobile devices. You can also work with some that offer bank accounts for trading these shares. No matter what method you are using for your trading and which one you think is best, it is important that you choose a broker who is able to provide you with reliable and instant money transfers so that you are able to complete your trades at the right time.
If your broker is slow at executing any orders you placed, you may end up losing out on a lot of money because you pay more than expected for the Stock or they aren’t quick enough at getting you out of the game, so be careful with this when working with them.
Some other things that you should consider when choosing a stock broker are the fees and charges they are offering to you. All brokers want some fees to help them perform their job, but learn right from the beginning how much they are going to charge you and what it all depends on (such as if they charge one rate for a small amount of trades and then another rate for subsequent trades, etc.). Always look at the terms and conditions on the website of your brokers and see for yourself if you can agree with everything stated there.
Rules to Ensure You Make a Profit When Trading Penny Stocks
While there is going to be some risk when you get into Penny Stocks, there are a few rules that you need to follow to make it easier in order to make some money with Penny Stocks. Some of the most common rules that are best for your trading include:
- The investor needs to have a plan in place right from the start that helps them to know their entering and exiting strategy. This helps to keep some of the emotions out of the game.
- The investor needs to know when it is time to exit. You should cut your losses when the market starts to become more unpredictable so that you don’t lose more money than you have to.
- The investor needs to make sure that the reward is larger than the risk. You never should enter into a trade that seems as a sure loss.
- The investor must have a good scheme for managing their money. They must always keep this in mind when choosing a Penny Stock.
- The investor should never trade using their emotions. This is a guarantee way to lead to a big loss that will get worse when emotions come into play.
- The investor should avoid trading during the first hour of the day. There are many older investors who use this time to work on selling shares to beginners and they know that the price is going to go down. They hope to make a profit during this time before the Stock goes down. So, wait a few hours and then do your trading.
- The investor should never invest more money than they are able to lose. It is possible to earn a good profit if you are smart about your investments but never get so into the game that you invest more than you have to lose.
Learning to Minimize Your Risks
When it comes to Penny Stocks, it is important to realize that this is a risky investment. You are not working with a common stock that are on the usual Stock Exchange, hence getting the required information that you need in order to make perfect decisions is almost impossible. While you can make a lot of money with Penny Stocks, it is also possible to lose a lot of money in the process.
Luckily, there are certain things that you can do in order to severely minimize your risk with Penny Stocks. There are a few things that you must watch out for because these help to show which Penny Stock is too risky to work with. For example, if you notice that a company has a small operation and only a modest market capitalization, it is one of the riskier investments. Another thing to watch out for is Stocks that sell too low.
Some people think that all big companies started out with Penny Stocks and this is why they choose to go into this kind of investment. There are a few that do start out as Penny Stocks to get the funds that they need before moving into the Stock market, but this is abnormal and most companies do not work this way.
So why are some companies interested in offering Penny Stocks when there are other options? Some companies will go with Penny Stock when they want to pay for something expensive in the company or when they are looking to expand. The company can offer Penny Stocks in order to distribute some of its profits and make changes to its tax structure each year. Some brokerage firms will convince companies to offer up these Stocks because the brokers want to earn money from investors. Some companies will even offer Penny Stocks if it determines that they are not going to grow anymore in the future and they would like to place the ownership on the investors.
This is why you need to be careful about the Penny Stocks that you get into. Some are just looking for some help to expand and they will be reputable options that you can make some money on if you are careful and do your research. But others are just trying to offload some of their responsibilities or they want to get a tax break, rather than help you out, and you could end up losing a lot of money. When you go into Penny Stocks, a good way to think about it is that these companies don’t really care about the investors. If you have this wary thought in your head when investing, you are more likely to pick a Stock that benefits you the most, in the long term.
Scams and Penny Stocks
Scams are pretty prevalent inside the Penny Stocks world because they are not part of the normal Stock Exchange. Many of the companies don’t even follow the SEC rules so getting information that you need can be difficult. It is easy for scams to arise in such situation.
As an investor, you need to be careful with your money and watch out for these scams. There are many good companies you can trade with and make some good money on, but there are also lots of bad brokers who will try to just take your money, bad companies that want to make money quickly, and even other investors who will start bringing up their own Stocks and earn higher than they paid for a bad Stock. You need to be independent and learn to think on your own so that you can get the best return on investment and not get taken in by one of the scams.
Getting started on Penny Stocks is pretty easy as long as you learn which companies to trust, pick out a good trading account, and find a broker who will not charge you too much to work with. Add in some good research and one of the trading strategies that we will talk about below, and you are all set in making some great money with Penny Stocks.
Misconception About Penny Stocks
It is common for people who want to make money off these Penny Stocks to start spreading some rumors and misinformation about how Penny Stocks will work. It is likely that you have heard at some point that many popular Stocks on the market today started out as Penny Stocks. These rumors are started in order to get new investors to purchase Stocks that they wouldn’t otherwise at a higher price because they want to be in on the ground floor of a company that is going to go big. However, as a diligent investor, you will find out that this is not true at all and the only reason that some of these companies had Stocks that were worth less money is because they split up their Stocks, not because they started out as Penny Stocks.
Some people also assume that because a company offers Penny Stocks, it is not safe to trade at all. This is true in some cases. There are some companies who just want to make money quickly and then leave you with something that is worthless, but there are also some companies that are using this as a way to help them out. The regulations for getting on the larger Stock Exchange are pretty strict and some companies are really great, but miss out by a little bit for getting onto the common Stock Exchange. They may start out as a Penny Stock while they work on making it to the main Stock Exchange, theoretically there is nothing fundamentally wrong with them. These are the companies that you will want to bet on because they can make the best return on investment.
It is never a good idea to go into Penny Stocks thinking that it is easy. There are many brokers and others who are in this business who will try to tell you all their success stories and try to convince you that anyone is able to get into Penny Stocks and make a fortune. These people are usually trying to get you to buy into something so that they can make more money as well.
There are a lot of misconceptions that are out there about Penny Stocks. Some of them may be true, but many of them are just because of the buzz that is around the Penny Stocks to get you to purchase them or they are from people who just don’t understand how the market works. Before you invest your hard earned money, make sure to take a step back and really understand how these kinds of Stocks work so that you can make the best possible decisions.