While penny stocks are generally a higher risk form of investment than investing in most of the stocks which are publicly traded on the AMEX, NYSE and NASDAQ exchanges. At the same time, there are ways to manage your risk and make a significant profit by trading penny stocks. Like any other kind of investment, being successful is all about learning to minimize your risk and maximize your returns; and even if you’ve always shied away from penny stocks due to their reputation as a risky investment vehicle, you may want to reconsider once you know how it’s done.
Penny stocks are also like traditional stock trading in that it’s important to research any stock which you’re interested in buying. However, it is often more difficult to do your due diligence and researching penny stocks calls for a different approach than you may be used to even if you’re relatively experienced as a stock trader – and choosing when to buy and sell these stocks is also a different process.
Successful penny stock traders don’t make their picks the same way as someone who deals in traditional stocks would. For example, when you’re analyzing a penny stock, the fundamentals of the company are much less of a factor; in many cases, they’re not really a concern for you as a trader at all. You’ll need to be able to dig much deeper than you would when trying to decide whether or not to purchase a traditional stock. In fact, you have to become something of an investigator to sniff out the most profitable trades.
Unless you already have a good amount of experience successfully picking penny stocks, it’s not really a good idea to pick your own stocks. It takes a lot of practice as well as a natural talent for picking winning stocks which other people might not see. If you don’t have this skill or years to develop it, then you may never become expert enough to confidently choose penny stocks.
Fortunately, you don’t have to be an expert at picking penny stocks to make a profit as a trader. With the right tools at your disposal, you can trade penny stocks while keeping your risk to a minimum, whether you’re an experienced trader or you’ve never done any kind of investment before. You may want to consider trading using the recommendations of the experts in the field; there are some traders who have the skill and the innate talent needed to pick the right penny stocks consistently and a few of these exceptional traders have set up subscription services which allow you to access their picks for a fee.
Depending on the service, you may receive information on which stocks to buy; and the better services will also tell you when it’s a good time to buy and sell. A subscription service may not be the answer for everyone, but if you’re interested in keeping your risk low and giving yourself a leg up as a trader, it might be worth considering.