Beginner’s Information About Trading Penny Stocks Online
Windowofworld.com – Since writing about trading penny stocks online on my blog I’ve received several emails on the subject and it seems to have generated a lot of interest.
People have been trading stocks online since the beginnings of the internet, and now it is a simple matter for anyone who decides to get involved to start trading online.
However, there are a few things you should be aware of before deciding to start trading stocks, this is no exception to gambling, and this is true regardless of your knowledge or experience. You need to have some money to invest and it should be money that you can lose. Remember the worst case scenario – that is, you could misunderstand and your investment could be lost overnight. Fair warning if you don’t want to read any more.
Much has been written about online stock trading, penny stocks in particular, and by people much more qualified than me.
If the idea of a risky investment strategy that appeals to you, trading in penny stocks could be the adrenaline rush you’re looking for. It’s easy enough to start with, but success or failure is probably the same outcome.
First, penny stocks are usually defined as stocks that trade at less than $ 5 per share. Some people consider this arbitrary amount different and would say $ 2 would be a better yardstick, but, whatever the definition, it is a stock that is usually traded off the major exchange. They are often fickle and unpredictable and their performance is very difficult to monitor or predict.
It’s fair to say that trading stocks at a price of a few cents per share is the riskiest investment anyone can make – many experts would say pretty stupid. The temptation to buy thousands of shares for a few cents is one that often burns people’s fingers. What you have to keep in mind is that there is a reason the stock is so cheap – it isn’t really that valuable and the possibility of making a killing on the stock is far from the previous conclusion that some will try to convince you that it is. Determining the possible performance of these stocks is usually nearly impossible because there is often little information available in the company to perform meaningful analysis.
Don’t be lured into buying stock just because a newsletter or email tells you it’s a sure thing. There are plenty of sharks out there who will engage in a practice known as “pump and dump”, in which they will attempt to produce an unsubstituted hype about certain stocks in the hope that there will be a rush to buy, allowing them to sell their holdings. worthless to an unsuspecting candidate. You really need to be careful and do your own “due diligence” – otherwise you’ll soon regret impulsive buying of penny stocks.
Online stock trading is not difficult, and once you have a basic understanding of how it works and decided to give it a try, you will need an account with an online stock broker.
For penny stock trading, Lowtrades.com offers an excellent service. To create an account, you need to send an application form by post. It can be downloaded in PDF format from their website. After you open an account, you need to fund it (more details on how to do this are also listed on the site) and then, you are ready to trade.
In very simple terms, you will place an order with your broker via the online trading interface and they will carry out your buy and sell instructions. Every trade you make, buy or sell, will incur a small commission fee to the broker. With Lowtrades it’s usually around $ 5.
Presumably your interest in penny stocks means that you want to make a quick profit. It’s true that the rewards can be enormous – it’s entirely possible to make hundreds of dollars a day. In the same way, mistakes and losses can immediately increase too. Day trading is not always profitable, but always risky. Day traders buy stocks and aim to sell them on the same day for a profit – buy low, sell high strategies. Of course, if the stock price falls, you have to make a decision – sell it at a loss, or hold on with the hope that it will recover and you can cut your losses.
You should understand that not every share you buy will appreciate in value during one trading day. This means you could end up with your risk capital tied up in one company, leaving you unable to make other trades until you divest. Therefore, having all your eggs in one basket is not a great trading strategy.
For those with limited funds to invest in, this can present a bit of a dilemma. There’s no point in buying so few stocks that even if the price goes up, you’ll only make a few dollars – you should also remember to deduct brokerage fees from the overall profit as well. If you work with a small amount of capital, you will need to find a fair price that will allow you to buy a few hundred shares, certainly not less than 100.For example, if you can secure 300 shares and the price goes up by 25 cents, you will only get $ 75. minus commissions – hardly destroy the world. On the other hand, if the stock’s value increases by one dollar, you have $ 300. The basic math is pretty simple, so you need to look carefully at whether an investment might be worth it relative to the amount you can invest.
It goes without saying that the more investment capital you have, the more you stand to make, or lose.
Opening a trading account is quite easy once you know what type of account you need. For simple individual cash accounts, some brokers will ask for a minimum deposit and others will not. Browse to find the best deals for your personal circumstances. Fees will also vary, and these all affect your bottom line, so make sure you know how much each trade will cost you.
Finally, I’ll repeat my previous advice – never invest in anything you can’t afford to lose. Penny Stocks are a gamble, and if you don’t have a constitution to bet a purchase price on, don’t start with online trading of any kind. Sit back and think carefully about what you plan to do and what you hope to achieve with your investment. If you think about day trading, you should be in a position to monitor your stocks throughout the trading day – if you can’t do this, you won’t be able to sell when needed – that is, if the price will briefly jump.
If you want to start trading penny stocks online, read the subject carefully and learn as much as you can. There are many helpful websites such as AllPennyStocks.com where you can start learning and I’ve also included some helpful resources below for those looking to learn more. Don’t ever let anyone tell you it’s as easy as falling off the record – if so, we’re all millionaires by now!