Penny stocks are stocks from small companies worth up to a maximum of $5. Typical penny stock companies have low liquidity, and their shares also tend to be quite speculative. In case you are just getting started as an investor, you don’t need huge amounts of money. These stocks are cheap. However, it is not uncommon for them to multiply by many times more in just a matter of days.
In this guide, we’ll walk you through everything you need to get started with penny stocks
Penny Stocks vs. Regular Stocks
There is a huge difference between a penny and regular stocks. The penny stocks mainly concern small and new companies while the regular stocks are attached to thriving companies that typically trade frequently.
Penny stocks, as the name suggests, only require investors to spend a small investment typically in pennies per share. This lowers the investment risk. If you invest in blue-chip companies, the price per share is higher, and this means a more significant investment risk should things go south. On the bright side, the investments of regular stock investors are safer, even in volatile markets.
Penny stocks are arguably better than regular stocks because they move faster. With blue-chip stocks, it may take months before you notice any changes in the markets. Penny stocks, on the other hand, are more volatile and aggressive. Low-quality stocks may turn out to be highly profitable over shorter periods.
How to Get Started with Penny Stocks Trading
As you may have gathered already, penny stocks are just as risky as they can be rewarding. Individuals who understand the OTC markets in-depth or experienced private investors can go straight to signing up on trading platforms and buying stocks. However, it is best for newbies in penny stock trading to enlist brokers.
To get it right, you cannot overlook the importance of research. Having some facts at your fingertips is the only way you can reduce the risk of making losses. Do detailed research on platforms where your penny stock of choice is listed. A broker can help you access and navigate through marketplaces that interest you.
Rules to Abide by as a Penny Stock Trader
If you are ready to get started in penny stocks, the chances are that you understand the potential rewards and risks of penny-stocking. Fortunately, there are a few sure ways of maximizing your gaining potential while lowering the odds of making losses.
First, take your research for the right broker as seriously as you would dig for information about a penny stock company. Avoid promotional pumps and make choices based on facts and not marketing gimmicks.
Another practical tip is to focus more on small wins than big wins. When the opportunity presents itself, do not stall with the hopes of having better luck tomorrow. Any experienced trader will tell you that a substantial number of small base hits quickly turn into impressive annual profits. However, when done right, you could rip excellent returns from penny stocks in the future.