Learn the techniques needed to become a successful penny stock trader.
Penny stocks represent an excellent investment vehicle for producing
gains, while the risks are equally as high. When you finally decide to
get involved in penny stocks, to go 'Beyond the Brink,' there are some
things you need to know.
In fact, whether you have been burned by penny stocks in the past, or
have never even invested, the following theories are designed to give
you an instant and significant advantage over all those inexperienced
and uninformed traders. After all, to make money in stocks someone
usually has to be losing money. Which side of the fence do you want to
fall on?
Glass Jaw
Lots of people have made lots of money from trading penny stocks. Lots
of people have lost plenty, as well. What is the difference between a
successful micro-cap trader, and one who continually takes it on the
chin?
Uses professional stock picks and research. Does their own due
diligence. Observes patience. Takes lessons from past trades and stock
activity. Takes lessons from other traders. Decides between 10 stocks
at a time.
Uses tips at work, rumors, and so-called 'inside scoops' to pick
stocks. Doesn't investigate financials and corporate position. Falls
victim to negative emotions like greed, anger, and desperation. Makes
the same mistakes more than once. Looks at one stock alone on its own
situation.
So Let's Learn
The fact that you have taken the time to review this feature
demonstrates that you have the characteristics of a successful trader,
specifically the willingness to learn from experts and the experiences
of other traders.
So let's learn. As mentioned above, you should always examine groups of
stocks together when looking for a new issue to invest in. For example,
make a chart and write down the revenues of each. In the next column
list the earnings. Follow this by each of the subsequent criteria you
think are important. With all of the data on one table and available at
a glance, you can easily get a clear picture of which are the one or
two strongest companies from your pool of potential investments.
However, understand that stock prices do not necessarily act in concert
with the underlying fundamentals of a company. For example, there is
nothing saying that the stock of the worst company on your list won't
out perform the top ranked one.
For that reason you should also include factors such as trading
volatility, your opinion of a potential break-through due to some new
product, potential positive press releases, etc... This method is not
intended to reveal the best stock, but instead to give you additional
clarity about which are the best few and worst few according to your
own weighting of the various factors you have chosen.
Available Advantages
Get a discount broker. Monitor your portfolio online, do your research
online (and offline), and place your trades online. Embrace the
technology, because it provides superior advantages all across the
board. You can screen stocks, put those into comparative charts,
instantly access the corporate press releases, check the latest
industry news, and then place your trade... all for about $20.
Then you can monitor your trade order fulfillment, verify that the
money and shares traded hands, track the progress of the stocks, get
instant alerts for press releases... It is truly endless and complete,
and each step that you take full advantage of leaves other traders one
step behind you.
Keep small amounts of money in each stock, and only 'risk' money for
penny stocks. While these low-priced, volatile investments can produce
some truly incredible gains, they usually bounce among all sorts of
price ranges.
On a related note, if you get 'freaked out' or worried about a stock
you hold, you should consider selling your position. Try to invest in
solid penny stock companies that have a low share price because they
are small or undiscovered, not because they are having business
troubles.
Be sure to read our related articles Falling in Hate, Fools Rush In,
and Trading Myths, and our tools section on Choosing a Broker.
Beyond... And After That
Some of the most successful traders have a few things in common.
Firstly, they have made some major trading mistakes in their day.
However, they learned more from these mistakes than they ever did from
any of their great trades. Don't squander your failures by trying to
put them behind you.
Secondly, keep a journal with dates, specific trade amounts and prices,
and even the stocks you were thinking of investing in but didn't. You
can use this for a hundred different purposes as you become a more
advanced trader, such as seeing opportunities you missed, or learning
that your strategies are valid, or just to monitor your improvement as
you become more experienced from month to month.
