How much do you know about penny stock investing? Perhaps you have tried trading in the market a few times, simply to see what the results would be. If you were unsuccessful, perhaps all you need is a few practiced tips for reducing your risk in this perilous investment vehicle. There will always be risk involved, no matter how practiced and careful you are, but twisting the odds in your favor can certainly help you gain a greater momentum as you seek to come out with a profit from penny stock investing.
Apart from finding the right company to invest in, you must have an entry and exit strategy in penny stock investing to get you in efficiently and back out when the return is at its highest value. Remember, penny stocks are volatile. They move up quickly, but will drop just as fast. The amounts you are trading are low, so consider percent-returns on your investment. For example, if you purchase a stock at $0.10 and turn around and sell quickly for $0.12, you made a 20% gain on your initial investment. The opposite is true as well-a purchase at $0.12 and a sell of $0.10 is a loss of 20%. If you did so with $1,000, your loss would be $200. Keep your stops close, and if you should get stopped out, it’s time to make your move to another opportunity.
How did you discover the stocks you invest in? A majority of people who participate in penny stock investing found the companies they now invest in via a mailing list. This can be risky because insiders can load themselves up on shares, pump out company newsletters, and while subscribers buy, insiders sell. It is easy to see who the winner is here. To avoid having this happen to you, subscribe and simply be an observer for a while. By tracking investments, you will quickly determine if the company is scrupulous and giving their subscribers great opportunities or not.
The final general tip that can be given in regards to penny stock investing is to never invest greater than 20% of your whole portfolio in penny stocks. If you put an excessive amount of capital at risk, you are increasing your odds of losing what you cannot afford to lose. However, if the 20% you invest grows, you will have a return rate that is healthy with a far lower risk. Penny stock investing is risky no matter which way you approach it, so going into with useful tips to draw from will increase your chances of success.