If you are a penny stock investor then there are certain pieces of advice that you should follow if you want to maximize your profit. You should have a trading plan before investing. Below you will find a few tips that may help you construct your own penny stock trading plan.
Look for Adequate Penny Stock Volume
The first criteria that you should abide by is to only trade companies that have good liquidity. Volume is a crucial criteria of successful trading. If you combine low volume and micro-cap stocks then you have the possibility for possible manipulation. You don't want to trade penny stocks that may be able to be manipulated against your position. You also want to trade companies that will allow you to enter and exit trades without affecting the price. Low float stocks are likely to move against your position is you are trying to enter or exit a sizable position.
Avoid Penny Stock Tips from Neighbors
You should take charge of your own trading future. Don't depend on others to make your trading decisions. Following the hot stock tips from neighbors or co-workers or family members is one of the quickest ways to lose money. If they are truly privy to some inside information then you are opening yourself up to an insider trading investigation. You don't want any part of that.
You should also avoid penny stock newsletters. Most of these newsletters are paid stock promoters. Yes, they are paid by the company to create a glowing write up about their business prospects and peddle this to their subscribers. These newsletters are supposed to disclose this. If you look closely at the fine print, you can probably find the disclosure. But don't assume that every newsletter is honest enough to tell you this. They are not an unbiased source of information on the stock.
Never Trade Penny Stocks with Money You Can't Lose
Penny stocks should be traded with discretionary income. You should not be trading your children's college education fund. If you can't afford to lose the money then you shouldn't be trading penny stocks or any other stocks for that matter. There is always a great chance of losing money especially as you first begin to trade. When you learn the ropes of stock trading you learn to make better decisions but it can be rough going at first.
Learn to Control Your Emotions for Penny Stock Success
One of the greatest keys to your trading success will be whether you can control the emotions of fear and greed. These two emotions have wrecked more accounts and lost more money than you can imagine. Greed will keep you from taking a profit when one is there. Often it will lead to a reversal in the stock and the loss of money. Fear will keep you from acting or it may force you to abandon your trading plan. Fear has a way of causing you to exit profitable trades with very little profit and to stay in losing trades far too long. The idea of penny stock trading is to maximize your gains and limit your losses. Fear and greed will produce just the opposite effect. If you are having a difficult time managing these emotions then you need to take a break from trading for a while until you can get a better control of your poor decision making.
Get Real with Your Penny Stock Trading Strategy
If you are just beginning to trade penny stocks then you have a learning curve to overcome and you need a good dose of realism. Please don't begin to trade with visions of grandeur and great wealth. If you have expectations that are too large it will cause you to force trades and take too many chances. Understand, as well, that every trade will not make money. The hardest thing that new penny stock investors have to face is that they will need to take losses. Every trade will not make you money. Everyone recognizes but an amazing thing happens when they commit money to the trade. All of a sudden they don't believe they could be wrong. This leads them to double down on trades and exponentially increase their losses. Losses are a part of trading. Accept that now and you will be better for it.
Follow these penny stock tips and your skills as a penny stock investor will begin to grow.