THE MOST IMPORTANT THINGS TO KNOW ABOUT PENNY STOCK TRADING

penny stock trading

Getty Images/Svilen Milev

Penny stock trading has become very popular. In the past traders used to think that one day they’ll be no longer able to trade penny stocks.

As of today, those who were thinking this way¬†are still wrong and I don’t think they will ever be right.

What does buying shares mean to you?

Most stock traders would say it means to invest their money.

Some would say it means trading.

I’m not saying either one of these responses are wrong. But there’re more meanings into buying shares from a company than those two common responses that we usually hear from stock traders.

buying shares is like buying a tiny portion of a company. Many traders do know about this, but they usually fail to utilize this information the right way.

Are you one of them?

I hope not, but if it’s the case this blog post is the right one for. After you finish reading it you should be able to see why it’s so important to utilize those information that I’m going to share with you in the following paragraphs.

Let’s move on to this little list, shall we?

Stocks are offered from real companies, this is a fact.

Knowing that they’re real companies can be of benefit to you. Because you’ll always approach your trades as you were making a business decision. And it’s exactly how you should think about penny stock trading.

  • Buy shares where you see a bright future

Don’t be like those penny stock traders who can’t spend a day without trading. If you did not have any stock in your watch list to trade it’d be better if you skip a day rather than just pick a stock to buy your shares from.

Remember, you’re investing your money into a business and hoping that your shares will increase in value. That’s one way you can make money trading penny stocks. For this reason you ought to be careful as of which stocks you’re buying your shares from.

When you buy shares you own a part of that company, the more you know about such a company the better it is for you.

You make money when they do: There’s no other way around that. A company that looks like it’s not making profits, or that looks like it’s in a trending loss is not a good one for your investment. It’s just that simple, there’s no rocket science in that.

Most stock investors would rather trade long. What do I mean about that? In the market you can either trade long or short.

When you trade long is when you buy your shares at a specific price and you’re expecting the price to increase so that you can sell and make a profit.

On the other hand, when you’re trading short is a little more complicated which may be why most stock investors trade long.

Adam Milton, from about money gives a nice definition to short trading. He states “When a day trader is in a short trade, they sold an asset (before buying it), and are hoping that the price will go down. They realize a profit if the price they buy it for is lower than the price they sold it at.”

I warned you, it’s somewhat complicated to most stock traders. However many stock gurus tend to use it more than long trading.

If you know what you’re doing and have enough money for it, you can always try it and see if it works better for you. After all, it’s a part of penny stock trading.

To get back to our topic, if you’re trading short then you’ll have to approach your trades a little on the opposite side. For example, you wouldn’t want to look for a company that’s going to make profits after you’ve got your shares.

Instead, you’ll be looking for a company that’s going to crash in price, then you’ll make money as a result.

  • Look for a market that’s making new inventions

New inventions usually increase a stock’s value. When you trade those stocks you have a better chance to make profits than trading stock from a company that’s not doing anything.

You don’t even have to wait for a new product to launch to start making money from that company’s stock. The newsletter itself is enough to attract millions of investors aboard.

And you know what a huge volume means already to a stock. Large volume would most likely increase its worth and start making you money.

According to MarijuanaStocks.com, PTSD has been added to the list of medical problem that can be treated with marijuana. That’s the same thing as what I was just telling you. News as this one will cause many buyers to buy marijuana’s stocks hoping that profits will be made.

You have to be careful though. Not every newsletter is legit, you’ll have to be able to sift through the bad ones to find the legit ones.

How could you possibly do that correctly? You may have your own way, but if you don’t let me tell you how do I do that.

When I see news floating around either on paper or in social media. I try not to absorb those information until I, myself dig a little deeper to see if those news are actually what they’re claimed to be.

Basically, you’ll only need to get on the internet and start searching for those companies. Somewhere on their site should have at least one mentioning of any news they may have floating out there.

If I can’t find anything on their website I usually conclude that those news are not real. It’s just me, I like to have confirmations before I proceed through anything, which I think is not a bad idea. And penny stock trading is not an exception to that.

  • You don’t have to keep moving from one industry to another

Many penny stock traders have this habit. They want to see how would they do if they change the industry in which they’ve been trading. Although they may’ve been making money in this current one, they want to get out of their comfort zone.

Getting out of your comfort zone may not always be the right thing to do. At least in this case here I know it’s not the right one.

Although it may not be a bad idea in some cases, in many cases this idea has become a burden to them.

We all know that the more information we have on a company or an industry the better equipped we are for this industry’s stocks.

If you keep jumping from one industry to another there won’t be enough time for you to have as much information as possible. Our time is very limited when it comes to penny stock trading. As a result you’ll be more likely to make unwise decisions that could cost you a lot.

As fragile as it’s already is to trade penny stock, you should not commit those preventable mistakes. There are so many factors that are out of your reach in the stock market, but when you have one or two that you can control you should always take this advantage.

In conclusion

Many factors that make penny stock trading so hard to you may be coming from your own mistakes. I’m not trying to tell you that penny stock trading is not difficult. If that was the case then I’d be lying to you, but it’s not what I’m trying to tell you.

When you’re buying shares from a company you should always have some good reasons why you’re doing so, if not then you should have no interest investing your hard earned money into this company.

Like I told you before in the beginning of this post, buying shares from a company is owning a tiny part of that company. You don’t want to own part of a company just because you feel like doing so.

Instead, you should want to own a part of a company because you see a potential in this company, because you see that you can achieve something big in this company, because you see that there’s a great chance to make money in that company.