In the modern world, it is possible to grow your financial account exponentially just by being wise and maximizing viable opportunities in stock trading. Penny stock trading is an efficient trading platforms with high potential profits. It involves trading penny stocks that are usually under $5 a share. Though trade is often unpredictable, it is surprisingly consistent making it easy to earn profits. Penny stocks offer the highest risk to reward ratio than any other type of investment in the market and with a good strategy you can turn $5,000 into $20,000 in just a few weeks. They are the least complex, and anyone can trade. Click here for more on their list of the 10 top penny stocks. However, one has to employ some tips and strategies to earn profits.
Penny Stock Investment
Consider all variables
The number one reason why many traders tend to lose money is that they do not consider all variables. A dealer has to be familiar with how Wall Street, as well as the characters involved, work to be able to adapt to change. While stocks and individual players can change, Wall Street does not change. While you can make huge profits with penny stock trading, you have to know that it has its limitations. It is important to know all pitfalls that you can encounter I the trade to avoid incurring losses.
Consider trading as well as volume restrictions
Before you start the trading, analyze the daily trading volume. Only invest in in penny stocks that trade above 500,000 shares each day. Ensure you invest in stock for less than 10 percent of its daily trade volume since investing more than that will only make it hard to liquidate the assets.
Long or short
You can either make money by buying long or selling short. In the case of going long, investors purchase stocks anticipating that they will increase in the value of a period. Investing long can generate high returns of between 30 and 70%. On the other hand buying, short involves finding the stock which you think their price will fall then taking out a loan to purchase the stock then selling them back to the market. When the price of your stock drops, you will get profit which will be the difference between the cost of the loan and the earnings gained from selling the shares. Selling short is a risky strategy that should only be employed by experienced professionals who can accurately identify which stocks will fall in price.
An effective stop-loss method
A stop-loss method protects traders from loss by alerting an investor if the stock falls below a certain percentage or purchase price. They prevent you from buying shares that drop drastically but keep you investment open to significant earnings. Upon employing an automated stop-loss order, your stock is put up for sale once it reaches your designated stop price.