If you are starting your business as a stock trader, investing in penny stock is a good option. Penny stocks are available at relatively lower price, which is good for beginners. Even after having risk of illegal companies offering such stocks, the chances of earning good returns are more significant. But investors should know the right time of buying and selling the stock.
Following are some benefits of trading penny stocks.
Lesser price value per share
Penny stocks are sold for low price as dollar 5 per share. This is very lucrative option for new investors as they purchase more shares with small capital investment. This gives chance of exploring the stock market to new investors with few dollar investments. Like if price of penny stock drops, there is no worry as there is no considerable loss incurred.
Less risk of losing large amount of money
As penny stocks are usually available at very low price even then it is not advisable for investors to put his all money into penny stock trading. Investor should not invest more than he or she can afford to lose. In this manner investor doesn’t have to bear significant losses if prices drop.
Purchase more shares at lower prices.
If you are really confident about certain share of stocks, you can purchase more shares as price per share is low. In this manner, investors can buy more than one type of penny stock shares to diversify the risk. This will give you more options of stock trading, which increases the chances of profitability. Investors surely get some gain from any one source of investment. This can be possible only if you as investor spend some time on research and to study the stock market. One should know the fact of particular company and its offered stock shares.
Penny stocks are the shares that are offered to public by tiny or new organization that can’t meet the requirements of major stock exchanges. Many traders are deal in such shares as they want to start with little investment. Always keep in mind there is high risk involved because their value can lower down to zero anytime.
To pick correct penny stock, you need to have unbiased information of company’s business structure. As you do like while investing in other stocks, you need to understand type of business particular company are involved with and their future business plans.
It’s uncommon that the companies dealing in penny stuck shares have complicated businesses, more likely they are simple business that is easy to understand and research. Companies usually offer such shares for startup capital for their business. There are also some honest companies who have huge potential
Penny stocks are considered as one of the high risk investment options as per SEC. The financial reporting rules for penny stocks are not as stricter as they are for other shares that are listed on national stock exchanges. Pink sheet one of the types of penny stocks has no regulation at all for financial reporting.
Due to less or no reporting requirements, trading penny stocks alerts becomes tricky, and chances of fraud increased. Fraudulent activities prevailing in the penny stock market can easily influence the share price. This activity is known as Pump and Dump. After all these facts penny stocks certainly have potential of making huge profits. You can invest in shares of small companies that have potential to make money in future. Always remember that choosing right pick can give you good returns. If you suffer loss on some of penny stocks, other successful move in penny stocks can compensate all your losses.
Trading penny stocks and making money through it can be difficult. The person who is thinking of entering in this trade need to be aware of the fact that there is high risk involved in penny stock trading. There is no doubt penny stocks is most high risk and high reward trading on the stock market. Some people have been earned huge profits through trading such stocks.
Many people think that penny stocks value less than a dollar but normally these stocks are less than five dollars per share. You can do penny stock trading through a broker or through an online stock exchange.
Small cap stock trading can make you lot of money, but for this you need to do complete research like reading market trends and companies financial position etc. Sometimes stocks show up, rise and few days later disappear. In case of small cap shares risk is always there that stock can disappear anytime. This is why one needs to determine right time of buying and selling such stocks. Learning right techniques of trading penny stocks can help you to make money.
Penny stock trading depends on your own plan of investments. Stock trading is process of combining your experience, training and investment capacity. It’s essential that if you consider penny stock day trading, you should get some expert knowledge through reliable source. Before investing your hard earned money into penny stocks make sure to learn stock trading tactics.
But it is always very tricky to choose best penny stocks; it takes time, knowledge, practice and experience. Also luck also plays important role for getting success in penny stock trading. The people who are new to penny stock market should understand the stock market first, gain knowledge and learn the most useful ways to trade penny stocks.
Penny Stocks are not listed on stock exchanges like NY Stock exchange because they don’t meet the listing requirements. While buying penny stocks you must know the fact that listed stocks must have required number of stockholders, assets, and should give financial reports regularly.
These all facts make the penny stock trading the tricky one. For these reasons penny stocks are prone to manipulations. The share price of such stocks normally far under dollar five and they have small market capitalization because company dealing in are itself are of small scale.
Lack of information on penny stocks makes them tricky and it is difficult to find information about the companys financial position and turnover. Due to less public interest and few numbers of investors, penny stock trading volume is normally low. This means that even little purchase and sell can have bigger effect on the share price. The low share cost makes it possible to buy a huge quantity of stock with small amount of money. With lesser share value and limited cash needs, this market usually attracts new traders. Mainly, penny stock trading is considered as game of experienced investors.
Many investors will not get success; some also had to suffer losses. Don’t underestimate the value of research before buying worthy stock else you end up getting burnt.
Everyone wants good returns on their investments, but it is very difficult to find where and how to invest. The most important factor is risk tolerance. Families need to weigh their monthly expenses, only after meeting the needs of kids and home they can determine how much they can invest. Consideration like age also play important role, someone who are older near to retirement age, investment could be the only source of income, therefore he or she can bear minimum risk. One needs to know liquidity of their investment because in case of emergency he can easily sell such stocks right away. In other case like young and single people who don’t have any responsibility can put their income to high risk and high reward investment stocks.
These high reward investment options are also suitable for the persons who have sufficient capital for investment. One of the most famous kinds of such investment is penny stocks. There are plenty of people who made their fortune through penny stock trading. With penny stock trading people can make lot of money, anyone can become millionaire with penny stock trading but this can’t be possible without taking risk.
Penny stocks trading give great platform to new investors. As name suggests Penny stocks have low share price of the small scale companies. These types of stocks attract new investors who have small amount for investment, but ready to take higher risk to make more money.
Investors can purchase thousands of shares because of extremely low share prices with smaller amount of capital. Penny stocks are usually traded over the counter, this means they are not abide by rule and regulations or need to follow accountings procedures unlike the companies who are listed on stock exchanges. There some drawbacks with penny stock trading that every new trader should know before start trading such stocks.
As penny stocks have low trading volume, their prices can fluctuate very easily to considerable extent. That makes such stocks very profitable but this also makes them risky too. Such stocks can be easily manipulated by scam investors. Beware of such people, never take their free advice
Penny stocks are also known as pink sheets have no formal requirement unlike listing stocks. So some companies set up their business only to fraud investors. So avoid Pink Sheet stocks unless you have some reliable source of information on such stocks. Even other penny stocks which are traded over the counter only need to report once in a year, this why one should do his own research before investing money. Investors should enquire about the companies dealing in such stocks.
It’s not impossible to make fortune through penny stocks, but many people also lose money in penny stock market. It’s very critical to do your own research and invest your funds wisely. Don’t take penny stock trading as gambling. Move ahead with precautions and chose your pick wisely. This is the only way with which you can earn good profit from penny stock trading.