Do you know how to buy and sell penny stocks? Penny stock trading is an attractive strategy to many traders, especially new ones. It’s important to know the risks and rewards for this style of trading.
Why is penny stock trading so attractive to traders? It’s an inexpensive way to make money. If you’re new and learning how to invest in the stock market with little money you might think penny stocks are a great way to make a lot of money.
That may be the case but there is also a lot of risk involved. It’s important to know this sector works so you put yourself in the best position to profit.
When learning how to buy and sell penny stocks there are a few important factors to consider. There is the allure of inexpensive stocks that promise big rewards. Who doesn’t want to make a lot of money without having to spend a lot?
While you can make money, you can also lose it. You might be asking isn’t that how it is when trading anyways? Yes but penny stocks are extra risky due to manipulation and pumpers. When trading this sector you need to make sure you have excellent penny stock trading strategies. If you have a strategy that works, stick to it!
Don’t let greed take over. That’s the perfect way to give back your gains. If you can’t afford shares of large companies this looks like a good trade off. Hence the need to apply strict risk management.
One of the most important things you can do is your own research. Don’t buy and sell penny stocks based off other people telling you too. You have to ignore the success stories.
If the promise of riches is coming through newsletters or social media, do you’re own research. That’s the most important thing when learning how to buy and sell penny stocks.
Learning to buy and sell penny stocks isn’t just about hitting the the buy or sell button. There are a lot of penny stocks sold based on tips by the pros. If you look at the essence of penny stocks, there is a lot more selling happening. Why? Look at the newsletters.
If you read the disclaimer at the bottoms of these newsletters, you’ll see that these people get paid to pump these stocks. Hence the need to be super careful buying a penny stocks based off of a recommendation.
The majority of these companies are small, burgeoning companies or just straight up crappy ones. If their stock runs it’s probably not on earnings but because a few people kept pumping it.
If you do get into a stock being pumped, take your profits. Don’t hold on trying to make a million dollars. You can’t go broke taking your profits. However, you will go broke trying to win the penny stock lottery.
Take your profits and move on to the next one. Before you know it, you’ll have the money to trade the large cap stocks.
A lot of penny stock companies are new or small companies claiming big things. For example, there might be a biotech company taking about FDA approval to a life changing study.
Get in on the action now. This drug is life changing! You buy now and within a year this stock is going to be up to $20. How many times have we heard that? A lot. How many times has that happened? Rarely.
Don’t buy the hype. There’s a good chance you’ll be holding a stock for a long time waiting for that move. These companies need the hype. They need your money to stay in business.
Don’t fall in love with a penny stock either. It’s easy to be taken in by the hype. Falling in love with the penny stock hype is going to burn you. Always look at the charts and do your due diligence; even if it’s friends and family hyping the stock.
Knowing how to buy and sell penny stocks means nothing if you can’t read charts and patterns. The stock market is a battle of the bulls and bears. This battle forms patterns. Patterns are what traders trade. Read our post on how to read stock charts for beginners.
Japanese candlesticks patterns help to form support and resistance as well as give bullish and bearish directions. You may hear pro penny stock people tell you the charts don’t matter.
You have to ask yourself why they’re saying that. Most likely, they’re pumping a stock and hoping you taken them at your word without doing any research. Take our candlesticks patterns course to learn how to trade them.
Learning how to buy and sell penny stocks is risky business. Learn how to manage your risk and you can profit from this sector. Practice in a paper trading account before using real money. You may find that you love the penny stock sector or that this isn’t the sector for you; all while keeping your brokerage account safe.
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