Everybody wants to be rich overnight. Therefore some people turn to penny stocks because it does not require big cash outlay to get started, and you can own a lot of money.
Penny stocks stand for all those small companies that are great and have yet to rise or be exposed.
Before making any investment you should seek a constant high volume of penny stocks being traded. If you consider the average volume, you can be misled. If ABC trades 1 million shares today, and never trades for the rest of the week, the average for day will be 200 000 shares. For getting in and out at a satisfactory rate of return, you need constant volume. Also pay attention to the number of trades per day. Is it an insider selling or buying? Ensure if there is good liquidity. If there is no volume, you will find problem in selling shares so that you have to sell at a lower price.
There are many companies that run at a loss at the initial step. It is important to look at the reason of their losing money. Can it be controlled? If the company knows how to make an income, the company can use that money to develop their business that results in increase of shareholder value. The investors have to make more research to find these companies. By doing this you lower the risk of a loss of your capital, and increase the chances of a much higher return.
Penny stocks are unpredictable. They will swiftly go up, and fall just as quickly. Therefore it is wise to invest in different stocks instead on a single stock although you are sure that this will rise in price. By this you can cut your loss.
If an investor buys a stock at $0.10 and sells it at $0.12, he gets a 20% return on his investment while a 2 cent decline leads to a 20% loss. Some investor trades with a lower profit on a daily basis. If your investment capital is $20 000, a 20% loss will mean a $4000 loss. If you make this repeatedly finally you will be out of money. So you need to cut your loss. If you get stopped out, move on to the next opportunity.
To know more about this, visit us at:
http://www.beststockreport.com/
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