Connect with us
Our website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

Trading

What you should really know about penny stocks?

What you should really know about penny stocks?

Penny stocks are low priced stocks with limited market capitalization. They have little shareholders, sizeable bid-ask spreads, restricted information disclosure and low liquidity patterns. They are highly volatile and carry great potentials of both rewards and risks. Their prices can be manipulated by purchasing huge numbers of shares and precipitating a spike or offloading shares causing an abrupt nosedive.

There are few important points that every trader at all levels should consider while buying penny stocks. Here are seven such tips you seriously need to mull over.

  1. Basic research on the company

The first and foremost thing you need to do when deciding which penny stock to buy is to conduct a quick Google search. Quite often, this simple and quick step can provide you sufficient vital information to ascertain if the stock is worth your research, time, and investment.

  1. The unpredictability of the stock price

The volatility of the stock price is another crucial factor to consider while opting for a specific penny stock. You don’t need stocks that are down trending or moving at a snail’s pace for months. You want stocks that show rapid spikes with sustained stability. The stocks that exhibit a steady upward moving swing are the best bets to buy.

  1. The volume of the stock

It’s a typical newbie botch-up: you get too much fixated-on stocks that show consistent movement. You disregard to take a glance at the volume. This tremendous blunder can lose you a lot of money. A stock volume is the number of shares that change hands on a given day. Not just volatility, liquidity also matters. A company’s press release may look quite enticing. However, if there is minimal volume to support, refrain from trading it.

  1. Catalytic triggers and patterns

Think about considering a catalyst to prompt your selection of the penny stocks. In the share trading system, a catalyst is something that triggers an event or a release thereby adding momentum in elevating the stock value. Your ability to scout for such news and information on a broad scale can provide you gainful insights to handpick reliable catalysts and clinch a stock worth your investment. Study and analyze what patterns make a trade work and what doesn’t. Engage in knowledgeable decisions for your trades and investments to mitigate future risks.

  1. Word-of-mouth and hearsay

Listening to the buzz about penny stocks is excellent. Looking at what others do and say while choosing penny stocks is appreciated. However, don’t aimlessly follow the leads from stock traders and promoters. Have an independent, unbiased approach. Whatever works for others may necessarily not work for you. Instead, engage in consistent observation and learning, rely on your experience and make authentic and appropriate decisions to forge success in penny stock trading.

  1. Manipulation by brokers/promoters

Because of their shallow volume, penny stocks are susceptible to tampering by stockbrokers, promoters, and market participants of the company. As an investor, you need to be cautious about hoax companies that show sudden price spikes without any favourable news or press information. Companies with consistent positive performance and impeccable prospects are the safest bets.

  1. Time of the day

Not to detonate your psyche. Nevertheless, all bets and tradings are strangely contingent on the time of the day. The time whether its morning, early afternoon, mid-day afternoon or the evening essentially defines the yardstick to rank the best stocks for that day. Stock price fluctuation has an inherent linkage to the diurnal variation. As for penny stocks, experts suggest trading only during the morning hours.

Global Banking and Finance Review Awards Nominations 2022
2022 Awards now open. Click Here to Nominate

Advertisement

Newsletters with Secrets & Analysis. Subscribe Now