Penny stocks are also often known by the names small-cap stocks, micro-cap stocks, and nano-cap stocks. These stocks usually do not trade on the major share market. These are usually traded by means of Over-the-Counter deals or pink sheets.
Well now, the question that arises is ‘How to trade penny stocks?’
Penny stock trading is not so easy. If one dreams of becoming rich by this business, they will have to remain highly patient, consistent and aware. The most important decision while investing is to choose between long-term and short-term investments. While investing in a strong and well-known company, one can think of making a long-time investment as these companies tend to prosper rather than fall down all of a sudden. The companies which are flourishing and not well-established can crouch down anytime. Many of the developing companies are just frauds which consume the money of their customers. Before coming to any conclusion, the investor must do plenty of research about the firm in which they are going to invest.
Some ways by which a layman can turn into a successful trader are:
- This commerce can be compared to gambling. Just like in gambling, anything can happen; similarly, this business can show anything to the shareholder from great profits to major losses. As per the experts, becoming attentive and matured in the penny stocking world could be started with paper trading. Before coming to the actual trading world, paper trading gives a glimpse of the reality one will have to face in the future.
- Another thing that is of major importance is that the investor does not have a live broker while dealing with penny stocks. Hence, each and every responsibility is wholly solely of the shareholder. Doing research or finding an experienced trader is the task of a wise investor before investing a single penny in the stock market.
- Internet can serve the depositor both as a boon and bane. The reason for this is that while there are websites that provide certified and up-to-date information but a novie may be fooled by some attractive sites showing them only the bright side and asking them to fall in their trap. Eventually, many people do fall into the trap of these eye-catching glittery websites and lose their money. Public wants to see only the beauty but one should also have the capability to see the beast within that beauty. Therefore, it is highly important to look for the safe and proficient website while browsing.
- Doing a detailed analysis of the trading charts is another way to keep the losses away from one’s boundary. Checking the 52-day range, present range and volume of a stock can show the reality to the investor. Penny stocks are in most of the cases, having towering volatility. The value of a stock changes numerous times in a single day and going through the complete history of the company will help the buyer significantly.
Some of the best trading platforms are-
- TD Ameritrade
- Trade Station
- Charles Schwab