Monthly Archives: July 2015

The Basics Of Penny Stock Trading

The basics of the penny stock investing

Do you want to invest your money in stocks or companies? However, if you do not have the means to afford the big prices of shares, you may have to pursue penny stocks. Some people really like penny stock, because they they have low pricing; but the pricing can fluctuate, so it is important for you to choose shares carefully.

The penny stocks are also called a cent stocks, in some countries. These are the shares of small public companies that sell or trade (each share) at low prices. It is priced below $5 per share, and is being traded in United States. In the case there of several penny stocks, they have low market price that can lead to market capitalization. Those stocks can be manipulated by stock promoters, for the investors who want to make quick and large profits; investing in stocks like these, is a huge risk.

Overly promoted stocks can cause investors to overextend themselves, financially, spend up their savings and get deep into debt with national credit debt collectors or other debt collectors – so see to it that you invest wisely.

Concerns for investors

Many penny stocks, specifically those that sell for fractions of a cent, are not traded as advertised. They are the tools of manipulators and stock promoters. These people purchase large quantities of stock and they inflate the share price by misleading and making false positive statements – this is the so called the ‘pump and dump’ scheme.

These people buy millions of shares then make use of e-mail blasts, chat rooms, fake press releases, newsletter websites or stock message boards – to create a buzz of interest in the stock. More often, the promoters will claim to have inside data on impending news, to exhort the investor to buy shares quickly. The use of the internet (as well as, other devices) allows the production of penny stock scams to be carried out much easier than ever before!

It is scams such as these that can cause a lot of novice investors to go broke, chasing a financial dream that never materializes; instead, they end up acquiring more debt from organizations like prestige loans – and end up servicing stacks of bills!

In order to avoid this, it is imperative that a penny stock reach certain standards, before you invest in it. The criteria include: market capitalization, minimum shareholder equity and price.

In investing in a penny stock, here are the following steps:

1) You should be familiar with the many factors that add to the risk in penny stocks. If some of the people out there are planning to invest in penny stocks, there is a need for you to analyze, first, the risks before you invest thousands – or even millions of dollars. Here are the following factors that make penny stocks risky:

  • Lack of history or information
  • No minimum standards mean they did not pass or meet the minimum qualifications
  • Less liquidity. Looking for buyers of penny stocks can be hard. If you cannot find one, there will be a tendency to lower the price until it is no longer profitable to sell. This is not a lucrative proposition.

2) Create a brokerage account – In order for an investor to invest in stock, he needs to have a means to make transactions. This offers good access to stocks, with low annual fees and low commissions. You should take into consideration that your brokerage account will give you the data that you really need, to better assist you in making the best decisions. The best brokerage accounts includes historic prices, charts and other features that will help each individual trader to build a profitable portfolio.

Please note: Due to the volatility of markets (and the potential to make profits), beginning investors seem to allow their emotions to dictate their investing habits. And while there are times when this approach is suitable, overall, this approach will not serve you well. Investors who are most successful in penny stock investing are the ones who know when to enter a market…and when to leave it – these are known as entry & exit points.

Once a stock has gotten enough public attention (also known as, a buzz), it will attract many buyers and cause the price of the stock to go up. Ideally, purchasing a stock right before it sky rockets, is what the beginning investor wants to achieve, this is called the ‘entry point; but he or she must also fully recognize that this may very well be a spike in interest, thus, the price will (inevitably) drop in value. It is at this point that beginning investors should be wary of artificially inflated stock prices that could lead to the kind of financial over-extension that leaves one in financial conflict with creditors or debt collectors – getting help at should help, should this problem arise

Ideally, when a stock price has peaked, the beginning investor may want to exit the market, right before a sudden drop in the stock’s price – this is called the ‘exit point’.

Understanding these basic actions, along with calculating the data to support these actions, can save you from falling victim to the volatility of the stock market – as a novices’ investing habits can mirror the trends of a turbulent market (which is not the best approach, most of the time). To use a baseball analogy, one shouldn’t expect to hit a home run, in every single stock trade – true, some people have been known to luck-up and pick the “right stock at the right time” and hit a home run; but consistently hitting single base hits, is how money is really made, on a consistent basis; so, be mindful of this fact as you do your due diligence, before trading.