How to purchase penny stocks?

Venturing into the world of penny stocks is exciting. You are investing because you want a sizeable return. To succeed in this venture, you need to know how to evaluate the stock for its upside potential. This means you must figure out if the stock truly has possibility or is it just a “flavor-of-the-day” type of stock. Whether you’re investing a $100 or $100,000, you must create a credible risk-reward assessment of the stock.

Some of the tips to pursue when buying penny stocks:

Limit your investment and Diversify:

It is natural for you to feel excited about the possibilities of your desired penny stock, nevertheless you must protect yourself. Minimize your losses by reducing your holdings in a particular stock by 2% or less of your portfolio. Depending your appetite for risk, diversify your stock portfolio ensuring it doesn’t exceed more than 10% of your total selection.

Check trading volumes and liquidity:

Even if your penny stock investment is successful, you should still be able to sell your percentage of the shares. For this to happen, your stock must have adequate trading volumes and liquidity. Otherwise you may find yourself with only a few buyers and large wide bid-ask spreads. This would make it impossible for you to gain an actual profit from your shares.

Knowing when to sell:

Penny stocks seldom ride the stock market for a lengthy buy-and-hold investment. The penny stock sector rides on short-term trades, that’s why it’s imperative to know when to purchase and when to sell. If you make sizeable gains in a short amount of time, then consider selling them now instead of waiting for bigger gains which is likely to never come.

Look for high-quality stocks:

Some penny stock companies have more net worth than others. Good companies are those set up by experienced, industry experts who successfully left their previous companies, i.e. stocks with binomial results. Many successful technology stocks today were once trading in the single digits. Examples include La-Z-Boy Inc. and Citigroup Inc. 

What’s the bottom line?

Penny stocks can be a big gamble if you don’t know how to invest in them. Despite the short-term gains they can offer, it helps to adhere to a sustainable and profitable approach such as buying shares in known companies with proven track records.

For more information about how to purchase penny stocks, visit Small Cap Firms.

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What are pennies stocks?

Pennies stocks are traded outside mainstream market exchanges at low prices because they have very low market capitalization. Penny stocks are highly speculative and risky because they lack liquidity, have limited disclosure and following and have wide bid-ask spreads. Penny stocks trade via pink sheets or the OTC Bulletin Board (OTCBB).

What is the value of a penny stock?

The term ‘penny stock’ evolved from the market. Historically, penny stocks traded for a dollar or less per share. Today, the SEC has modified this definition to include all shares that trade below $5.

What is the difference between a penny stock and a regular stock?

Penny stocks do not trade on major market exchanges like the New York Stock Exchange (NYSE) or NASDAQ. That said, there are a few large companies listed at $5 per share who trade on main exchanges. Curtis Inc. (CRIS) is an example of a penny stock listed on NASDAQ. It is a biotechnology company.

 The typical penny stock company is small with speculative, highly illiquid shares. The company is subject to fewer regulatory and filing standards and limited listing obligations.

Who can invest in penny stocks?

Penny stocks are open to everyone. They are more appropriate for investors who tolerate risk very well. Penny stocks are highly volatile and have high levels of risk, but they result in large rewards. There is a heightened amount of risk related to penny stocks. All investors can protect themselves to a degree by implementing a stop-loss order before entering a trade. This will help you exit the market if your stock starts to dip.

How much can you make with penny stocks?

Penny stocks are capable of generating large returns. For example, many investors can turn $100 into $5,000 in a week; but these gains do not occur all the time and usually take months if not years to occur. Unlike with regular stocks, if you stay too long with a particular penny stock, you are likely to lose your investment. Therefore, trade safely!

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How do I get into penny stocks?

Beginner investors get their feet wet by first swirling their toes in penny stocks. As implied by the name, penny stocks are share held by companies with a low trade price; usually $5 or less. New investors can easily get hooked by penny stocks because they require a small percentage of capital investment. The low share prices enable investors to purchase thousands of shares and potentially earn a substantial return (the reverse is true as well).

Seasoned investors generally stay away from penny stocks because they are risky and highly speculative. Penny stocks have small market capitalization, limited disclosure, and large bid-ask spreads, limited following and lack liquidity.

If you want to get into penny stocks, take the following steps:

Signup for Penny Stocks Newsletters" and Get Alerts:

Penny Stocks newsletters help you stay informed about current and upcoming trends in the penny stock market. These newsletters are vital tools for retrieving up-to-date information on buy/sell alerts and stock prices. Some newsletters have chat rooms, community forums and valuable training materials. They will be your ticket into penny stock market. 

Conduct a Penny Stock Search:

Mainstream stock exchanges such as the NASDAQ and NYSE have minimum bid price requirements of $1 per share. Otherwise the stock will be delisted. Penny stock traders therefore turn to “Over The Counter Market”. OTC Market Groups arranges securities into ranked marketplaces in order to reflect the degree of investor engagement, disclosure and integrity of operations.

Narrow Your Trading Candidates:

After you understand where penny stocks can be traded, determine which stocks you’d like to trade. You can use stock screening tools to find stocks listed at less than $1. Narrow this list down according to your risk tolerance and strategy.

Understand the Risk:

Penny stocks are infamous for being risky. Many of the companies listed are small-cap stocks that are vulnerable to serious volatility. Liquidity is a genuine concern amongst penny stocks. It is definitely not uncommon for investors to wait around for weeks in the end for enough demand and supply to be generated so that they can exit before serious price fluctuations occur.

Investing in penny stocks is a gamble. It is a risk worth taking if you understand all the variables involved. To get started, open a brokerage account, conduct a penny stock search, narrow your company choices and understand the risk. By taking these steps, you will be set up to get into the explosive world of penny stocks.

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Good penny stock tips to earn more money and make profits instantly!

Penny stocks, as we all know are the stocks that are valued less than a dollar. They are a great way to earn more money without investing in much. But at the same time, they come with high risk of loss. Dealing with penny stocks involves both skill and luck. Though you might come across many who would say that if you are a skilled investor, you probably just don’t need the luck. Well, it is true, but not for all. This is because, not everyone is good enough to be a master at penny stocks.

Over time the best penny stock traders have slowly and gradually developed their skills in due course of time; they know how to take a good decision. They have been trading on a regular basis since a long time now, and therefore, they know how to reap benefits from the penny stocks. Well, but that is only the case with the ones who have been into business since long. What about the new traders?

If you too are new to this field and yet wish to make instant profits out on penny stocks, there are a few things that you must keep in mind. First and foremost, penny stock trading is all about finding a good penny stock on which you can make an informed decision and majorly is about how to capitalize on quality information.

The real question that arises here is, which among all is a good penny stock? We have got some tips that would help you to reap benefits post investing into a good penny stock. These tips are as simple in real as they are in theory. It is very important for the new traders to first learn the fundamentals. Only after that, you can come down in the market and participate. 

The first thing to do here is to make an outline of your goals and targets. Also make an action plan along. This will help you know and follow a guide as you move forward. Next thing to do is to plan how much do you wish to invest and what do you expect out of it as in returns. You must prepare a solid business plan that also tells you how you are going to accomplish your trade goals, because this is what best penny stock traders do.

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The pros and cons of penny stock trading that you must know

Trading penny stocks can be easy and quick task for the ones who have been into business for a long time, and for the ones who have an experience of the field.  But when it comes to the beginners, it might be risky game and therefore it is always suggested to pick the stock list carefully. Investing in penny shares has a lot of benefits over other stocks, but at the same time it has its own cons too. Risk and rewards, with any stock, always go hand in hand, but no more so than the world of the volatile tiny stock market. When choosing which stocks to go with, keep these pros and cons in mind so that you can make the right investment call.

The Pros:

Potential: Penny shares have a lot in them. Companies like Microsoft, were once a very small stock. Companies that are starting with a base value begin as tiny stocks more often than not, and those that have an exciting new technology or product will quickly rise. If you're looking for a way to rise with the giants, then penny stocks do have the potential to do so.

Better Rewards: Penny shares also have the potential to provide better rewards compared to the risks involved. While traditionally traded stocks offer a great deal of incentive, such as security and experience of the market, penny shares can often mean a softer "hit" if the stock doesn't perform up to your expectations. On the other hand, if you've invested in a company that has $14 per share, and then that drops to $4, you're likely to lose tens to hundreds of thousands of dollars. Some investors lose millions. It isn't likely to happen with small stocks, as long as you invest wisely.

Fast Turnaround: The values of such tiny stock can go up within a single trading day. Some stocks take years to see the same gains as penny stocks do.

The Cons:

Active Traders Required: If you don't have the time to invest into making fast, quick trades, then penny stocks may not be suitable for you. Investors who aren't quick on the ball may miss an opportunity to sell whenever a stock does go high, and as a result, will hold onto it until the profit shrinks or vanishes entirely. Invest only if you are an active trader.

Thin Trading: These type of stocks are thinly traded, which provides some measure of security for the investor, but also leads to sharp declines in value as well. Choose your stocks carefully.

Humble Start: Most penny shares are in small businesses. While Microsoft did begin as a small stock, a majority of these companies may not become profitable for some time. Sometimes it may take years for them to grow.

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