Penny stocks are the stocks of small companies that trade under $5 and usually having with market caps of under $200 million. These are much risky stocks, so it’s good to get some extra knowledge about them before starting your investment. Here are some tips for trading penny stocks successfully.
- Penny stocks are much risky as compared to regular stocks so invest within your means. Set aside your savings and not put all your money in penny stocks.
- Penny stocks are much volatile stocks so keep an understanding of this thing, keep a close eye on price changes.
- It is better for penny stock traders that they already have some experience of investing in stock market, after such experience move toward penny stock trading. Minimum one tear experience with mid cap stocks is quite good.
- Learn all the main aspects of penny stocks. Understand the technicalities at the back of money flow, market capitalization, and share structure. Keep an eye on common scams of penny stocks.
- It’s better to not add following stocks in your portfolio: Stocks of the companies those have less than $10 million in revenue per annum, any stocks whose price hype is created by the promoters, stocks of the company or industry that you have no knowledge.
- Be aware of the common scams of penny stocks, which include pump and dump, poop and scoop and some others.
- Try to pick the stocks of the companies those have good cash generating records and are growing their free cash flow over time and keep away from the companies those have heavy debt.
- It’s better to compare price per share against book value per share rather than share prices.
- Consider the element of cash flow before investing.
- Not put all your money in a single small cap stock, instead diversify your portfolio and limit any tiny stock to no more than 5%.
The above tips are good for all new as well as experienced traders. For getting more guidance regarding penny stocks, subscribe our free penny stock newsletter.
Fast Moving Stock does not own any shares or plan to get a position(s) in the company(s) anytime soon. Moreover, we have not been compensated for the posting of this article/report/analysis, as this is just an opinion of our writer/contributor. Not recommandation to buy or sell any stocks Read full