Buying your first penny stock(s) is a major endeavor. When investing stock, you only have one major goal: to buy the stock at a low price and then sell it at a higher price so you get a high return on your investment.
Trading penny stocks can be a way to make extra money on the side, to make a full time living, or even to become a millionaire if you’re really lucky at it. This Timothy Sykes review tells the story of how Sykes became a millionaire in penny stock investing by the time he was a senior in college.
Here are the top four tips for buying your first penny stocks:
Tip #1: Diversify
The best way to protect yourself against taking a major loss in penny stock trading is to invest in multiple stocks rather than just one or two. This way, even if one of your stocks plummets in value quickly, you still have other stocks for you to fall back on (one or more of which may increase in value to offset your losses).
Tip #2: Research Stocks Intensely
Most of your time spent in trading penny stocks will not be spent on actually buying or selling them, but rather on research on the specific companies to buy and sell from in the first place. You want to buy the highest quality stocks possible from legitimate companies with huge potential.
Check the profitability of the company and make sure they have no major liabilities. It’s also a good idea to only stick to companies that are available on the major stock exchanges. The reason why is because the exchanges are tightly regulated, so you stand a less of a chance of falling for a costly scam.
Tip #3: Pay Attention To The Liquidity Of A Stock
Once you have bought shares of a stock, you will be selling it sooner or later. Make sure that you have sufficient liquidity in a stock so you know you can trade it more effectively. If you don’t, you could find yourself in a scenario where there are few buyers with low bids, in which case it will be nearly impossible for you to turn out a profit (or at least a significant one).
Tip #4: Be Prepared To Cut Your Losses
Penny stocks are generally a short term investment, so knowing when the time is right to buy and sell is critical. If the value of stock you bought is dropping, however, with no signs of it increasing, then you must be prepared to sell the stock now so you avoid taking a larger loss. Carefully monitoring the stocks you invest in is key to your success here.
Buying Your First Penny Stocks
When buying your first penny stocks, you want to do so very careful so you can avoid dangerous beginner mistakes. Carefully research the companies you want to invest in, and know when the time is right to buy and sell.