Day Trading Penny Stocks
Penny stock investing is considered a high risk because companies that sell speculative securities are not subject to the same regulations as companies who are listed on a major exchange. Speculative securities are mainly listed on Pink Sheets. The Pink Sheets are largely for companies who have financial difficulties and do not use an outside auditing company to scrutinize financial statements. Because a company does not have to prove financial health it is much easier for the numbers on financial statements to be bogus. Speculative securities are priced based upon the market as a whole which means that the price is not a true representation of a company's value. Day trading penny stocks are bought and sold during the same day. The downsize to trading the same shares on the same day is that prices do not fluctuate much in one day's time so making a sizeable profit is unlikely.
The stock market is a place where buyers and seller converge and make exchanges. These exchanges are called stocks or shares. Before an individual begins day trading penny stocks he or she needs to understand how the market works. Shares represent ownership in a company. Companies become public so that they can sell shares in the hopes of expanding and experiencing growth. The main influences on stock prices include the economy, oil prices, inflation, supply and demand, fear, and the news. In addition, earnings, growth, and layoffs can affect prices.
One reason to invest in speculative securities is because they are low in price. Because penny stock investing is low in price investors do not have far to go to double their money. In other words, seeing an increase of five cents to ten cents is easier than an increase of one hundred to two hundred dollars. Investors need to have sound methods on how to evaluate companies that are listed on Pink Sheets to minimize the risk and maximize the success of investments. One way to minimize the risk is to use a broker who knows the market well and understands how to invest in speculative securities.
An essential tool to successful trading on speculative securities is finding a broker that has a good understanding of how the market works. A broker that has integrity and is knowledgeable about day trading penny stocks can offer the investor an edge. A broker that has integrity and a reputation for honest dealings will provide the investor with an account statement every month and maintain good communications throughout the process. Additionally a broker will have contacts that will allow him or her to get a reasonable price on shares that the investor wishes to sell or trade.
Developing a strategy is important with speculative stocks. A smart individual will do all the research possible beforehand so that his or her chance of experiencing gains is possible. While no one wants to experience losses it does happen sometimes. Subscribing to a reputable newsletter will provide some insight into penny stock investing. A wise investor will pay attention to warning signs such as layoffs and store closings and be cautious when purchasing shares with a company who may be in trouble. Using a technical analysis may help predict a stock's price in the short term. An individual who decides to invest in the market should do so while using wisdom. God's word emphasizes the importance of being faithful with what is given and being a good steward in every area including finances. "A faithful man shall abound with blessings: but he that maketh haste to be rich shall not be innocent" (Proverbs 28:20).
Online trading provides some benefits that can help a person to decide how to excel at penny stock investing. Some sites on the Internet provide benefits to those who choose to join their site as a member. Membership benefits often include helpful tips and low-risk strategies on how to be a successful investor. In addition, the benefits include hot picks that are recommended and analytical commentaries along with other perks. Of course there are usually membership fees to join which would be over and above any brokerage fees.
Understanding the risks is important with any type of stock investment. However, day trading penny stocks is usually more risky than trading shares listed with major markets. The attractive thing about speculative securities is that it is possible to purchase small and trade for a little bit more to realize a profit. The main thing for a person to remember is that he or she should not purchase more shares than can be reasonably afforded. Money for necessities to live should not be used to gamble with. An individual who gambles with money for necessities will suffer much more when losses occur than someone who is using extra money that will not be needed for current or future necessities.
For more secure investments a person may want to consider purchasing bonds or certificates of deposit. Though the return may be low it is sure and secure. There are many who claim that penny stock investing can be a sure deal; but there is no guarantee of a profit and there is always the possibility of a loss. In addition, if the situation is really bad a person might not be able to sell his or her shares at all. A person should use some wisdom when turning to the stock market and should not sink everything into one thing but instead should participate in different types of investments to minimize losses and increase gains.
How To Trade Penny StocksInvestors can find out how to trade penny stocks by searching the Internet or by contacting a broker. Penny shares are traded outside the major stock exchanges. The attractiveness to buying and trading speculative security or penny stock is because the shares are priced low. Speculative security is normally available through smaller companies. An investor should use some wisdom in determining how to buy penny stocks and what companies to invest in. Buying and trading low-priced shares are considered high-risk because only small amounts of shares are usually available on a daily basis. Changes in supply and demand could cause shares to gain or lose value very quickly. In addition, the requirement for these types of shares to be listed on the market are not regulated compared with companies that list with the major stock exchanges. Companies that are listed on the major markets have to provide financial information that shows financial stability to the public.
Speculative security shares have a higher chance of being subject to fraud because the company who lists them can show bogus information on financial health and the investor has no way of verifying that information. Before becoming a victim investors need to have knowledge about how to buy penny stocks. Securities that are not listed on the major stock market are usually listed on the over-the-counter (OTC) Bulletin Board or Pink Sheets. Shares that are listed on Pink Sheets are not part of the stock exchange and normally do not meet the listing requirements of the major exchanges. The Pink Sheets are available to companies that have financial difficulties, are in bankruptcy, or are not audited by an outside auditing company.
Investors who are truly interested in learning how to trade penny stocks should contact a broker. A broker can evaluate an investor's financial situation and help him or her determine if speculative securities are the best choice. A brokerage firm will usually provide the investor with a monthly account statement showing the value of shares. An investor should choose a broker that has an honest reputation and one who is very knowledgeable about buying and selling stock. Full service brokers provide more information and help than discount brokers. However, discount brokers do not charge the fees that full service brokers charge. A full service broker will help the investor find a buyer on shares for sell whereas a discount broker provides mostly advice and information helpful for investments.
Companies that have become public and are selling shares are hoping to expand and experience growth. People who buy stocks into a company share in the ownership of that company. A person who chooses to own shares in a company can purchase those straight through the company instead of using a broker. However, when it comes time to sell those shares a broker may have some contacts that can lead to selling faster than an investor trying to do so on his or her own. When the investor chooses to buy shares that are inexpensive a broker may recommend learning how to buy penny stocks. The price of the stocks is based upon market conditions, inflation, oil prices, growth margins, and other market factors.
Deciding on a company to invest in that is listed on the Pink Sheets can be accomplished by doing some research. One thing to determine is if the company is financially secure. Companies who list speculative securities are not regulated by the Securities and Exchange Commission (SEC) so there is no way to be completely sure of the company's financial status. One thing that learning how to trade penny stocks will teach an investor is that they are risky. However, any good investor should know that any type of investment can be risky. There is always a chance that the investment will turn out to be unprofitable. "Let integrity and uprightness preserve me; for I wait on thee" (Psalm 25:21). Ask God for direction using integrity with upright investing and making smart choices.
The Internet has many sites that offer an investor options on trading. Some of the information found on these sites will teach a person how to buy penny stocks. Trading online can be simple and can be done from any computer that has Internet service. Most sites online charge a membership fee and then they recommend shares to buy and sell to their members. The amount of stocks or shares that are picked may vary by company. Some companies offer as few as three picks per month whereas others may offer up to ten per month. There are many claims made by companies who offer these services online. The best way to choose a company is by doing some research and asking for the claims they make to be backed up with written documentation.
Penny stocks are not the kind of investments that a person should consider if he or she wants shares that slowly grow over several years. Many investors that have found out how to trade penny stocks have also discovered that the smart way to invest is to do it using various avenues. In other words, do not put everything on one type of investment. Other types of shares that are sold include common, preferred, and treasury shares. Common shares become treasury shares if the corporation buys them back from the investor. Preferred shares provide the most advantages towards ownership. Some of these include advanced voting rights and dividends. A person who is a preferred shareholder gets paid first when a company has to file bankruptcy.