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How to make profit trading penny stocks

By Edited Nov 13, 2013 0 0

The stock market can be a very lucrative income when the right strategy is used. Penny stocks have been considered for a long time to be the best way to build your bankroll or make a nice income. With the right tools and strategy anything is possible.

Things You Will Need

Internet connection.

Stock trading tool.

Step 1

Learn the Security and Exchange Commission rules. The SEC rules are a key thing to learn before trading, because a lack of knowledge will result in hefty fines.

Step 2

Learn bankroll management. A lot of people make the mistake of risking too much too early. Penny stocks are volatile stocks, and can put a dent in your bankroll without proper money management. You need to risk less than 5 percent per trade in order to handle the variance. Once you learn proper money management, you can be profitable at trading penny stocks.

Step 3

Get a trading tool. Trading tools for the most part are overrated and can occasionally miss out on big gains. When using a traders tool, make sure to compare the numbers with news articles and broker advice. Tools can be helpful when trading penny stocks because of the high volume of trades.

Step 4

Find the diamond. The number one reason people consider trading penny stocks is the huge upswing involved. Look for brand new companies with big ideas and plenty of capital. If you can find the company that is being undervalued to the extreme, you can make a years worth of salary in one month trading penny stocks. The key is to find that one stock with the best potential.

Step 5

Get predictions from reliable sources. You should research the stocks before you invest, but sometimes its good to have a consistent winner to get advice from. You can go to a hot pick website or study the most consistent winners in short-term penny stock trading. The main thing is consistently, find a company that is consistently picking winners.

Step 6

Join a trading club. Trading clubs are basically internet forums that exist for people who trade penny stocks. They discuss trading strategy and past experiences. You can really learn a lot from these forums and a lot of people have good ideas. You will be able to pick out the best ideas, but its good to hear everyone's perspective.

Step 7

Decide how much money to invest. Depending on how much money you have to invest, it might be a good idea to start slow and get some experience before investing big money. If you feel like you already have the knowledge to invest, go ahead and get started.

Step 8

Choose a broker. There are many brokers to choose from, but its up to you to decide which one best suits your situation. Some have higher fees but better picks, so if you plan on picking stocks yourself, its best to go for a broker that charges the least per trade. The only downfall is the customer service.

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Tips & Warnings

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