How to trade penny stocks?

Important points to follow for trading penny stocks:

• Don’t believe the success stories floated online

Penny stock investors have to make sure that they don’t believe any story, post or forum without making their personal research over the matter. You will have to understand that the penny stock stories are manipulated and unfortunately, misleads you. The profitable penny stocks with solid earnings growth are determinable with the correct company’s information and the actual stats over 52-week data.

• Don’t believe the tips and disclaimers

Penny stock tips will appear in your newsletters, emails, and mobile phone messages. There is nothing free in this world and you need to understand that the disclaimers at the end of the newsletters are meant to trap you for purchasing the stocks. There is a strong sense of purchase required for the penny stocks worth the purchase.

• Don’t trust the company’s management blindly

There might be statements by the company’s CEO, CFO or other influential people regarding the company’s state. Don’t just believe them as there are many penny stock scams floated by the top management of the companies. ‘Pump & Dump’ scheme is related to the fake business models of the companies trying to cheat their investors.

• Buy only large volume stocks

Penny stocks trading should be done for the companies trading at least 100,000 shares a day. The low volume stocks can cause difficulty in getting on the right position. The number of shares traded can be viewed and the lesser traded stocks should be avoided.

• Keep stoppages in mind

Stop-losses turning towards a hard way can make you lose money. Hence, wherever there is risk involved, try to cut the losses for better risk rewards.

• Buying the best stocks

Penny stocks having the best earnings and reputation in the market can be explored with the right research. They are easy to look if you develop an eye for them to look out for the most promising stocks.

• Be a quick seller

The major setback for the investor is to sell the stocks late. You can make good returns with penny stocks if you sell them quickly and have an aim of earning from them without getting greedy. This is the most important aspect to get the profits and move on in the right way to get better returns over your investment.

• Selling too short

Penny stocks are highly volatile and you could easily lose your money by adopting the wrong side of the trade. It is difficult to find the penny stocks to short having a hype in the market.

• Don’t trade large positioned stocks

You need to find the right way to trade in your limited investment. The basic rule of trading maximum 10 percent of the stock’s daily volume should be adopted. The limited share size will get you out of the stock in a better mode.

• Don’t fall in love with the stock

Penny stock companies show their brighter side to the world. It is important to do your own research and not becoming a fan of the stock just by following its hype.