Penny Stocks have share price of below $ 5, and market caps of under $ 200 million. They allure the investor mainly because of their low investment cost and high potential to make profits on .Trading in these stocks can be a way of losing money also.Some experienced investors may have penny stocks in their portfolio. It is possible to make money on penny stocks if you understand them and know the game. Scammers and manipulators play in penny stock and make loads of money.
Some of the basic steps to becoming a successful penny stock trader are discussed here. Penny stocks can fetch a fortune if the stock pick is correct. A wrong choice can wipe out your money. The penny stock market is highly volatile, and the stock’s previous performances cannot be watched as with other stocks, and so the risk is too high. The first thing to do is to look for a broker. He should be honest and reputed, and you should check with the Securities Commission in your state to ensure that he is a legitimate broker. A discount broker only places your order, but does not give advice for investment. A full service broker gives advice and places orders, and the service of such a broker is to be taken, since he can advice you on penny stocks, but he will cost more.
When you first trade on penny stocks, use a dummy account, until you get used to the market and gain experience enough to trade. Make paper trades that do not actually involve buying or selling the stocks chosen, and then monitor your trades to see how your picks have done. Switch to actual trading only after you have been successful on paper.
Any successful penny stock trader should have portfolio diversification, so that the losses you make on any one penny stock, or a sector, can be evened out with other sectors or stocks in the market. It is usual for the market to have some of its sectors or stocks performing well, and others not so much.
Never invest because of a tip or some news, because this may not work, and you may lose all that you thought you would make, and more. Never risk more than what you can afford to lose.
With all these information you will be able to do penny stock trading successfully. Do some mock trades first and see that you get something of a hang of it before you start with the real stuff.