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While penny stocks represent an excellent investment vehicle for making gains, the risks are just as high. When you finally decide to get involved in penny stocks, to go ‘Beyond the Threshold’, there are some things you need to know.
In fact, whether you’ve been burned by penny stocks in the past or have never invested at all, the theories below are designed to give you an immediate and significant advantage over all those inexperienced and uninformed traders. After all, in order to make money from stocks, someone usually has to be losing money. Which side of the fence do you want to fall on?
Glass Jaw
Many people have made a lot of money trading penny stocks. Many people have also lost a lot. What is the difference between a successful micro stock trader and an investor who is constantly making losses?
He uses professional stock picks and research. He does his own due diligence. Observes patience. Learns from past trades and stock activity. Learns from other traders. Decides between 10 stocks at a time.
Uses workplace cues, rumors and so-called ‘insiders’ to select stocks. Does not research financials and corporate positioning. Fall victim to negative emotions such as greed, anger and helplessness. Makes the same mistakes more than once. Looks at a single stock on its own merits.
So Let’s Learn
The fact that you have taken the time to study this feature shows that you have the characteristics of a successful trader, especially the willingness to learn from experts and the experience of other traders.
So let’s learn. As mentioned above, you should always study groups of stocks together when looking for a new topic to invest in. For example, prepare a chart and write down the revenues of each of them. List the earnings in the next column. Let this be followed by each of the other criteria you think are important. With all the data available in one table and at a glance, you can easily get a clear picture of which one or two companies are the strongest in your potential investment pool.
Keep in mind, however, that stock prices don’t necessarily move in line with a company’s underlying fundamentals. For example, there’s nothing that says the stock of the worst company on your list won’t outperform the top-ranked company.
Therefore, you should also include factors such as trading volatility, your view on a potential breakthrough due to a new product, potential positive press releases, etc. The purpose of this method is not to reveal the best stock, but instead to give you additional clarity on which are the best few and the worst few based on your own weighting of the various factors you have chosen.
Available Advantages
Get a discount broker. Monitor your portfolio online, do your research online (and offline) and place your trades online. Embrace technology, because it provides superior advantages in every way. You can scan stocks, put them on comparative charts, get instant access to corporate press releases, check the latest industry news, and then place your trade… all for around $20.
You can then monitor the execution of your trade order, verify that money and shares have changed hands, track the progress of stocks, get instant alerts for press releases… It really is endless and complete, and every step you take full advantage of leaves other traders one step behind.
Keep small amounts of money in each stock and only ‘risk’ money on penny stocks. While these low-priced, volatile investments can yield truly incredible gains, they often bounce between all sorts of price ranges.
On a related note, if you ‘freak out’ or get worried about a stock you’re holding, you should consider selling your position. Try to invest in solid penny stock companies with a low share price because they are small or undiscovered, not because they are having business problems.
Be sure to read our related articles Falling for Hate, Fools Rush in, and Trading Myths, as well as our tools section on Choosing a Broker.
Beyond… And The Aftermath
Some of the most successful traders have a few things in common. For one, they made some big trading mistakes in their day. However, they learned more from these mistakes than they learned from their great trades. Don’t waste your failures trying to put them behind you.
Secondly, keep a diary with dates, specific trade amounts and prices, and even stocks you considered investing in but didn’t. You can use this for a hundred different purposes, such as seeing the opportunities you missed as you become a more advanced trader, or learning that your strategies are valid, or tracking your progress as you become more experienced month after month.
