If You Want To Be Rich, We Can Help You! | Buying Penny Stocks is Not for Beginners

Penny stock investing is the siren call of the investing world.  New traders often hear tales of 1000% returns with nickel trades and they can’t help, but try it.  There is nothing inherently wrong wanting to buy penny stocks, but the mindset of people who tend to rush into them isn’t right for any investor.  If you want to gamble, play blackjack, you’ll have better odds.  If you want to invest in penny stocks read on.

Fundamentals are Still Fundamental When Buying Penny Stocks

Even if you’re a well versed technical analysis trader, the minute to minute movements of the stock price mean nothing if the company files for bankruptcy.  You need to know enough basics of the company you are trading that you won’t be blindsided by poor management, bad product, or aggressive competition.  These companies are already small and very susceptible to a shifting market.  So bottom line, become an expert on the company you want to invest in and better yet, become an expert on the industry it’s in as well.  This is one of the main factors that will help find the best penny stocks to buy for the highest gains.

Big Wins and Big Losses When Buying Penny Stocks

One of the lures of  investing in penny stocks is the big wins from small price changes.  If the stock value is $0.12 and the stock moves the minimum $0.01 you just gained 8%.  That’s better than many buy and hold investors for the whole year.   Of course even if you’re diligently using your stop losses (you are aren’t you?) then the least you could lose is 8% on one trade.

Spread Out The Pain When Buying Penny Stocks

Low value and thinly traded is a recipe for spread gouging.  The market makers are going to want a margin of safety since someone with a decent bankroll could move the price very quickly.  Spreads of 10% and greater are not uncommon in the penny stocks world and that can wipe you out in a series of mediocre trades where your back testing says you should of broke even.  Scalping is tough in this arena, I would lean towards momentum investing.

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