Definition about penny stocks :
Penny stock is a stock that has very low price, may be in pennies. This type of stock is very popular among investors because if the price of penny stock rises, then the investor can earn a lot by just investing a little.
Here are some steps to consider before you invest in a penny stock:
- When you are starting your investment, you cannot do it without a broker because you have to open an account, only then can you be able to trade. Analyze the different discount brokerage houses because they are the one to offer the lowest per trade costs. The process of opening an account can take up to 5 business days.
- Before investing, you need to know or get familiar with trading terms like volatility, market capitalization, technical analysis, open order, margin, company life cycle, fundamental analysis, limit, acquisition targets, economies of scale and many more economic terms. Get yourself acquainted with as many terms as possible and then get into the business.
- Be sure what you want, whether you want to have fun and want to gamble or be a regular trader. If you seriously know about the type of investor you are and your goals, then penny trading will not be a tough game.
- The amount of information available on this type of stocks is very little, so you need to do lot of research to get full knowledge about them. The first thing you need to do is identify the stocks by looking at the revenues, debt levels, increased earnings, press releases and management. Also look at the spikes and dips in the stock price. Another very important aspect you need to look at is insider trading.
- Become a member of a forum or a newsletter or any investor clubs. Check out the stocks that are being discussed about in these forums and then do your own investigations about them.
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