Penny Stocks for Dummies

penny stocks for dummiesLast updated: 26 January 2017

Penny Stocks for Dummies – The Fast Track to Trading

Trading is complicated for first-timers. If you have never delved into trading before, you can find yourself losing more money than actually making profits. There is a steep learning curve and without going through penny stocks 101, it will be something that every trader experiences. We are going to attempt to fill you with all of the basic knowledge needed to move from penny stocks for dummies straight through to your first real purchase.

Understanding Penny Stocks

Before we jump into how to buy penny stocks, you will need to first understand what they are and how they work. Penny stocks are the same stocks that long-term investors are used to seeing on the market. The likes of Microsoft and Google are essentially distinct cousins of a penny stock. The only difference between these stocks and a penny stock is the overall cost of each share. Penny stocks are low valued stocks that investors pick up for under $1 – $5.

Learn Stock Trading Basics

Penny stocks are meant to be purchased in large quantities so that the buyer can make a profit off of their investment. Typically, penny stocks are unregulated, which means that market shifts can happen quickly. The goal is to buy penny stocks when they are lower and sell when they start to rise. The following basics should be adhered to at all times:

  • Research a stock before buying it. Penny stocks are companies that have yet to make a name for themselves.
  • Penny stocks are volatile. If the price rises to an acceptable range, sell.
  • A broker will be needed to make the transaction. This can be a live, or online broker. There are many big named brokers, such as SureTrader which are trustworthy.
  • Follow proven strategies that help you learn stock trading and can boost your penny stocks education.
  • Follow only qualified stock tips and be cautious of fly-by-night newsletters that promise tips.
  • Trade with stocks that only deal with high volumes. Never buy stocks from a company with little activity as it may prove to be difficult to sell while the price is high.

There are even a few ways in which a person can practice on the market before actually making a purchase. This can be done by what is called “paper trading.” The goal is for a person to understand the market through a series of trades in which no money is transferred. This can be done by:

  • Writing down a company name and how many stocks you have “purchased.”
  • Following this company’s stock to see how far your investments have come.

Through this method, it is important to approach it just as you would if you were using money. Research the company, their assets, debts and current financial reports. Do your research thoroughly. From here, choose a strategy to follow, get a list of the top penny stocks to watch and stick with it until you have mastered it. While this may seem like a wasteful way to get started, it is the best way to learn the market. Penny stocks for dummies does not need to cost you a dime with this method.