Investing 100 in penny stocks

By choosing the right stocks, however, you have access to an unlimited upside. Penny stock price movements are usually more volatile than normal stocks. For day traders, this means there will be multiple opportunities for profit within a given trading period.

Even if the entire economy is undergoing a recession, there will still be penny stocks rising in value. There are drawbacks to trading penny stocks. Many of these companies have very little or even negative value, which is why they are priced so low to begin with. The majority of penny stocks will remain penny stocks for life. Furthermore, because they are often traded over the counter and with little oversight, these stocks are a prime target for pump and dump or insider trading schemes.

Still, when managed correctly, trading penny stocks can still be quite profitable. In order to find penny stocks, you need to use a penny stock scanner. A scanner will help you find hot penny stocks that are hidden from the general public attention. This is by far the easiest way to find penny stocks. You can find the best penny stocks to buy for that meet your specific parameters and filters. This can lead to a powerful penny stock list to buy. If you lack ingenuity, try scanning for the most active penny stocks in the premarket.

This will give you a list of day trading penny stocks. Remember - A lack of research can lead you to invest in some of the worst pump-and-dump scams. Learning how to make money from trading penny stocks comes down to putting in the time and effort. There is no secret formula to find stocks before a pre-spike. But, learning how to find the right penny stocks can definitely improve your chances of success.

Now that you've learned how to find the hottest penny stocks the next big question is where to buy penny stocks? See below: Where to Buy Penny Stocks? Most penny stocks are listed on the OTCBB over-the-counter bulletin board , however, some of them can also be found on the regular stock exchanges. Professional traders on Wall Street refer to penny stocks as over-the-counter stocks. Investors can trade and access these pink sheet stocks via an online stockbroker.

So, how do you buy penny stocks? See below: How to Buy Penny Stocks? The best way to buy penny stocks is to go through a regulated stockbroker. A Broker will get you access to the market with leverage, so you can begin trading quickly. Besides a using broker, learning how to buy penny stocks requires two more things: Money to purchase the penny stocks.

A penny stock trading strategy to help you pick the best penny stocks. Try to avoid buying penny stocks directly from dealers who call you to pitch investment opportunities. You'll want to have a wide variety of options, so you can find the best-performing stocks. Penny stocks come in two different forms: pink sheet stocks and exchange penny stocks. Usually, when people refer to penny stocks, they probably referring to stocks being traded over the counter.

These stocks usually have very small market caps and the market itself is very lightly regulated. That sometimes makes getting out in a hurry nearly impossible. Limited information — If a penny stock trades on the OTC, company information will be extremely limited, if it's available at all. Unlike other stocks, there's no steady flow of reports to base your investment decisions on. The company doesn't have to meet any minimum exchange-imposed standards. This dramatically increases the possibility of fraudulent activity.

This gets back to the lack of available buyers. The smaller the pool of buyers, the wider the spread will be. The potential for bad news — Due to the low interest in penny stocks, it would take only a few sellers — or one dumping a few thousand shares — to send the price of the stock plummeting. And just as the price can go up in a hurry, it can also come down just as fast.

That leaves you no time to react and little opportunity to recover after the fact. The company could go out of business — Penny stocks represent companies that are dangling on the edge of solvency. If the company you're invested in decides to close its doors, your investment — small that it may be — will disappear forever.

Some distressed companies never recover, and most small companies never become big companies. Possible schemes — Keep a lookout for fraudulent deals. Watch out for pump-and-dump schemes, which is when someone claims they have insider information to inflate the price. Sometimes a promoter short sells a penny stock for a high price then gives negative news to lower the price.

Also, be wary of any promoter who advises you to buy stock every time the price falls and assures you of massive profits once the price goes up. How to Minimize the Risks of Penny Stock Investing If you're going to invest in penny stocks, you'll need to be fully aware of the risks and ready to do what's necessary to minimize them.

Fully understand and appreciate the fact that penny stocks are speculations, not investments. That realization alone should keep you cautious, which is exactly what you need to be. These companies tend to be of higher quality due to the standards imposed on them by the exchanges. Also, the fact that they want to be on those exchanges indicates a more serious intent about the company's future direction.

The rest of your portfolio should be invested in more stable assets, like mainstream stocks, bonds, cash, and real estate. Diversify within your penny stock allocation — Spread your money across ten or more penny stocks. Most will either languish or crash and burn.

Only a small percentage will pay off. You'll need to have your money spread across several to take advantage of that possibility. Make sure the company has some sort of core value — If it's a distressed company, it should have something positive going for it. These include recognizable trademarks, a valuable product line, or a positive book value the value of its assets is higher than the market value of its stock.

If it's an upstart company, it should have a promising product line with a proven market. The company has to have some element of tangible value, even to be worth considering. And by all means, avoid any company that seems to be mostly promoting a concept. It's possible most investors have speculated in penny stocks at some point or at least contemplated the possibility. If you're considering taking the plunge, make sure you're doing it within the context of a comprehensive investment strategy that isn't based primarily on the success of penny stock investing.

You should fully understand the probability that you're going to lose money, all in the hope of getting that big-league home run. And there's a genuine possibility you'll lose your entire investment. It can happen if you choose too many of the wrong companies. But it can't be emphasized enough: Never invest in penny stocks with money you can't afford to lose.

Finally, if you're seriously considering penny stocks, start by paper trading them. You can paper trade for free using the TD Ameritrade service. Invest real money only if you show a consistent pattern of picking enough winners to make it profitable.

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