These days, penny stocks seem to be more and more into the attention of stock investors, drawing also the attention of many beginners interested to run this activity with the obvious purpose of putting in little money and make big profits for the future. More than this, as a beginner you will have the chance to practice with small things before moving further on bigger investments.
Although this type of trading refers to penny investing, do not consider that it will cost you as much as a penny for your efforts. You should be very well prepared and work very hard until you reach the professional level in this industry. This is a helpful guide pointing you the basics on penny stocks to make your introduction much smoother.
* Learn about the definition of penny stocks. You should know that there are 3 ways through which penny stocks are defined:
1. The price per share is generally set for less than $5, although these stocks actually sell for a few cents, given their name.
2. The capital of the company makes this one be considered small and thus selling its shares as penny stocks. A small company should have a capital less than $50 million to be able to issue these penny shares.
3. Another way to define these penny stocks is revealed by the place where these stocks are traded. They are named penny stocks because they can be found listed on Pink Sheets, in OTCBB, and NASDAY Small Cap Market.
So, if you find a stock defined by any of the above, then you should know that this is what makes it a penny stock.
* Know the basics on trading. This involves the adherence to trading stocks principles that are listed in Big Boards – NASDAQ and New York Exchange. You should do the research on the company and run a technical analysis. After that you must know how to buy and sell profitably, following the market trends along with tips on stock investments.
* Know also the things that are positive and negative when it comes to penny stocks. For instance, be aware of the fact that penny stocks are very risky shares to invest into. It is a market which is very fluctuating not to mention that it lacks reporting requirements and control over the set regulations. This will require on your behalf more caution especially when you need to do some thorough research into the company that you want to invest.
Another thing that you should avoid is the information coming from the inside. This information will be released with the clear intention of attracting your investments into a company that is about to go down. The best thing to do, is to research on your own and make your decision based merely on your conclusions.
* Get yourself educated into penny stock trading as only in this way you will be able to become a good investor.