Penny Stock Trading Tips for Beginners
You already know what the stock market is, right? You go there and buy stocks and you get to own a small portion of a large company specifically at the best stock trading firm in Malaysia.
However, there are also some penny stocks which act the same as them, but they’re also not the similar at the same time.
If you got confused, do not worry, I will explain it in-depth and I will also give you some tips if you wish to buy some penny stocks in the future.
What is a Penny Stock?
A Penny Stock is a share that a company sells to would-be investors for a much cheaper price. They usually range anywhere between $2-$5 per share- making it so affordable for the masses.
They’re usually sold by startup companies or companies who do not have a solid track record yet. However, these organizations have a good potential for growth and they will need your money to make that happen.
Penny stocks work just like a normal share that you would buy on the major stock exchanges. Each stock represents a tiny representation of ownership of a particular startup company.
Why Should I Get Them?
The major reason why you want to get a penny stock is that they’re relatively cheap and most of the companies have a very good potential for growth.
They’re often overlooked by bigger investors because they might not have the time or patience to wait for them to grow. Still, if you’re thinking about getting some stocks, this is a good place to start.
If you want to get some penny stocks, hold your horses! Read these tips first before heading out and buying your own shares:
1. Find a Good Broker
Even though they are much cheaper than regular stocks, you should still seek out a stockbroker. They will initiate the trades for you and some of the firms also give you some extras as well such as new information, learning materials, and more.
2. Look for Promising Companies
Doing your homework, aka research, is necessary before you start buying shares. Look for companies who have a high potential for growth. Some industries you may want to look into are the technology and fashion sector as they are always getting new trends every year.
3. Set Your Expectations Low
Because there are only a limited number of traders and investors, at least when compared to the major stock exchanges, you have to set your expectations low.
Due to the limited number of people making trades, it is possible that the liquidity of your penny stocks is low. If you’re expecting to earn huge profits, you may want to transition to the main stock exchange instead.
4. Buy Less, Sell More
One of the best ways you can get the most profits out of your shares is to buy more of them for cheap and sell them for a much higher value.
That is why you need to be on the constant lookout for any market changes so you can make timely trades to maximize your gains.
5. Learn from Your Mistakes and Move On
No traders are perfect. Heck, even the most seasoned ones commit a mistake from time to time. It is best that you learn from your shortcomings and move on. Keep track of every trade that you do, find out your mistakes, and correct them so that the same event will never happen again.
Investing in penny stocks is a great way for you to dip your toes in the world of share trading. They’re much cheaper, but they have a higher potential for growth since you’re investing your money on promising startups. Just follow the tips I’ve outlined above and you should be fine.