Penny stocks are the stocks that are traded below Rs. 10. Penny stock is the common share of the small company that is traded at a low price. Every country has a different definition for the penny stock.
In the United States, penny stocks are those which traded below 5 dollars. In the United Kingdom, penny stocks are those which traded below 1 pound.
You can trade in penny stocks in big stock exchanges like the New York Stock Exchange.
There is another thing is there which known as OTC. OTC stands for the Over the Counter. In India, penny stocks are listed in stock exchanges and traded at a very low price.
Penny stocks are very risky to trade as it is very volatile. There few buyers and sellers are available there to trade in the penny stocks. As it is risky and easy to manipulate.
Many times trader trade on the penny stocks in the excitement without having knowledge about it. And loses money as trade is worthless. So always try to be focused on what you are doing.
Ways To Invest In Stocks
The penny stocks are not so infamous within the traders as it is not so popular. Not so many people are willing to invest in the penny stocks. All this because it is not very safe to invest in it.
Still, if someone wants to invest in the penny stock so there are certain things that you need to consider before investing in it.
Without considering certain things if you invest money in the market then it might cause you the loss of money. Because penny stocks are very volatile in nature and it can fluctuate any time and you predict its movement.
So here some of the things to consider before investing in the penny stocks.
Success Stories: Many times when we are trying to invest in the penny stocks we see so many success stories about the people who have invested in the penny stocks. Never focus on this kind of success story as many are fake.
Price Manipulation: Nowadays brokers manipulate the prices of the stocks and it can also be done by the promoters of the company just to attract the traders to buy a share. So if you see any stock price increases without any news about the stocks so be careful about that.
Right Time To Sell: Traders many times wait extra time to get the extra profit and due to which get them loss. So if you are getting profit then sell it at the right time.
Always Have A Plan: While you are trying your money in the penny stocks you should have a certain plan how it gonna works. How much money you will invest and all.
Penny Stocks Tips
Many people want to try their money in the stock market but due to lack of money, they don’t do that. So the people with lack of money can’t try their money in the market. It is not true.
There is a market where people with less money can try to trade. That stock is penny stock.
Here are certain tips to start investing in the penny stock.
Order Limit: With a market order, your broker attempts to buy a stock at the current best available price. However, even small buy orders can cause some penny stock to rocket. If you put in a market order on an illiquid penny stock, you could unintentionally cause the stock to rip and lose a ton of money.
Position: Many penny stock traders go gung-ho when they find a stock or opportunity they like. They put all of their money into it or a large position all at once. This is a disaster waiting to happen. Never buy an entire full position all at once.
Strategy: To be a successful penny stock trader you need to follow a proven strategy. Ideally, you will learn two or three different profitable strategies so you can cycle through them if one isn’t working in the short-term. So choose the right strategy.
Passions: Despite what some people will tell you, penny stock trading isn’t easy. It isn’t some get a rich quick scheme that will turn you into a multi-millionaire overnight.
Advantages And Disadvantages
Low Prices: The best things about the penny stock is its low price. A trader with the min amount can try their money in the penny market which attracts traders.
Fast Movement: Another good benefit of trading in the penny stocks is that its private move hfatst. The speed of the trade is something that provides the fast result of the trade.
Easy To Get: One more benefits is that it is easily available at public platforms.
Lack Of Information: One of the risky parts of investing in the penny stock is that traders do not have much knowledge about the penny stock. So it risky to invest in it.
Fraud: There are chances of the company to be a fraud. As small companies might be bankrupt as there is not much information are available about such companies.
Liquidity: The penny stock is not much popular among the traders due to this the liquidity is low. So because of this, there are chances of the trader to sell the stock at the right time.
If you want to know about the stock for the options trading then you can read Best Stocks For Option Trading.