Insider’s guide to penny stock trading
Stock priced below 15 rupees generally called as. Small investors and traders, Amateur traders with low capital and Stock operators are more attracted towards these stocks. In this games professional and operators generally wins over retail and amateur traders and investors. Traders and investors gets trapped and hold dead investment over the years and nothing happens. On the other hand, after taking position, prices start to go down and stock gets delisted with investors and traders in pain.
Before Investing in penny stock, trader and investors must read this post.
1. Analyze self-risk profile
Penny stock investing or trading is high risk and high reward type trading and not suitable for everyone. New comers do not have this idea and are lured by high returns but do not have high-risk idea. In normalallocation must around 5% or below. While for traders, Stoploss is necessary. If stock continues with lower circuits then exit is not easy and losses may be larger than expected. Penny stock generally traded ill liquid by volume but high volatile by price. This will cause expensive buying than decided price. These are practical facts and traders and investors must consider them before
2. Cost or brokerage
Penny stock trading and investing is very expensive if traders and investors trade with there regular broker accounts. It will eat up all your profits and in losing positions; it will kick you out of the market as fast as it can. Before, traders must open very low or no brokerage monthly or year fixed fee account. This is only thing will work in you favor and keep you alive in market. Small retailers those cannot afford fixed brokerage plans, must stick to long-term investment plan, that will cut there cost significantly.
3. Research or Technical analysis
Penny stock traders must use fundamentals as well as technical analysis go get it right. Trading in stock with good fundamental provide you extra safety from being get trapped.
Short-term penny stock traders must use daily chart for there analysis. For medium term trader’s weekly chart and for long-term traders monthly charts can be helpful.
For investors I suggest good fundamental ratios and monthly chart analysis will be best way to be winning penny stock investor.
Traders do not track buzzing news around stocks, as most the time there are paid news or initiated by operators. Before, must watch it minimum day to week to get its pattern.
. After entry, we may see stock stuck to range for days to weeks. In this case, Traders must stick to there plans keep tight stop losses and wait for targets suggested by charts. While for investors, Patience is compulsory factor and if you right at investment decision in right stock, it definitely pays off.