Anyone can trade penny stocks. Especially since they only require a few hundred or thousand dollars to get started! But, just because everyone can trade penny stocks doesn’t mean they’re good at it.
There is an art to trading penny stocks. Many people find this out the hard way by investing some of their money only to end up losing it quickly. To avoid major losses, you have to understand the stock trading basics before making any investment decisions.
You don’t have to be one of those people! Here are four ways you can boost your chances of success trading penny stocks so you can actually make money.
Do Your Own Research
Investing in traditional stocks can sometimes be easier than investing in penny stocks because many companies are well-established and have been around for decades.
That’s not the case with penny stocks. Many of the companies that are being traded for pennies you probably haven’t even heard of.
No matter what kind of stock you buy, you always have to do your research, but it’s even more important for penny stocks. Look for:
- Companies that can easily be searched for on the internet
- Patterns in the previous trading of stocks for that company
- The time of day that’s best for trading with a particular company
- Companies that are trending with other investors
Take Your Time
When you find a company you are excited about, you will probably be tempted to dive in right away. That’s a bad idea.
Do your research, then give it some time. Track the company to see how their prices move and see how the company operates.
In the meantime, think about what price you’d like to buy the stock at and what price you would sell at. When you’re confident you’re making a good investment choice, you can even set up automatic transactions so you can buy the stock at your target price and automatically sell it at your target price as well.
Never Use Your Emotions When You Invest
The biggest mistake you can make a as a penny stock investor is to let your emotions get in the way. You can get excited about a stock, but you should be able to separate yourself and think logically about your investment. That way you’re able to sell the stock when the time comes, no matter how excited you were about investing in that particular company.
Don’t Look Back
Although you may be tempted to keep tabs on a stock you sold, it’s a very bad idea. Watching it climb and regretting having sold it will only make you second-guess your next investment.
Instead, you have to learn to let go. As soon as you sell a stock, move onto the next one and don’t look back. Once you feel you have detached yourself emotionally from your previous investment, you can check in and see how it’s doing for educational purposes.
In many ways, trading penny stocks is a lot about how you think and feel and less about the money in your pocket. With these tips, you can boost your chances of success.
