A Practical Guide on How to Trade Penny Stocks

How do I trade penny stocks? This is the same question that is asked by every person who is thinking about entering the penny stock market. It’s a good question too and the answer is a lot more complicated than you probably wanted to hear. Trading penny stocks is easy but to make money trading them and not lose is what is difficult. It doesn’t mean you shouldn’t try though. There is risk involved but there’s a lot of potential for profits if you know what you are doing.

Yes, penny stocks are one of the most high risk investments in the stock market, but there have been people who’ve made millions trading these stocks. Some millionaires have become this rich overnight through small caps.

Penny stocks, if you haven’t already found out, are stocks that are less than five dollars a share. Most people who hear penny stocks will think they are under a dollar. This is true as most penny stocks do trade for under one dollar. You can’t trade penny stocks on the major stock exchanges. You can trade them through an online stock exchange called the over the counter board or through a broker.

A broker will cost you money so most people prefer to do it themselves. You need a brokerage account, there are many to choose from, and once you are set up all you have to do is start looking for penny stocks to buy.

To make profits consistently with penny stocks you will have to be able to read the market as stocks will rise and fall. Not every penny stock will go up. Most actually go down.

Some penny stocks that see huge profits will sink days later, so you have to be careful and take profits as soon as you see them. Greed does not work in the penny stock market as these stocks are extremely volatile and unpredictable. You will have to learn how to read signals and trends and to know which penny stocks look like they are ready to make big moves.

The internet has a vast amount of resources and websites to help you learn the ropes on fundamental and technical analysis. Before you begin to trade any penny stock, quickly educate yourself on the market and how to read penny stock trends and signals.