Make Your Money Work Well in Lesser-Known Market Corners
While penny stocks often lure inexperienced investors with low entry prices and a high potential for dramatic returns, they also come with increased risk due to low liquidity and limited financial reporting. I hope to introduce you to methods for effectively balancing the risks and rewards associated with undervalued and high-potential penny stocks. Many people finding this guide will be looking for stock picks. If
Is it really possible to make significant money buying and selling penny stocks?
Yes, it is possible. Is it likely? Well, that’s another question. Some people have earned significant money simply buying penny stocks low and selling them for a profit, but actually doing this isn’t as simple as it sounds.
Because these stocks are low value per share they are tempting for the beginning investor, but this is actually a complicated market that can be quite volatile. Even though the price per share is low, these stocks are generally traded in volume. This is how you make more money, but it also what makes them risky. Prices can go up or down quickly and as the price goes down you need to find a buyer if you want to sell your stock.
Buying penny stocks and selling them for a profit requires research. If you are willing to do the work and put in the time there is money to be made in this business. There are a few keys to success in this market.
As you strive to make the most of your penny stock investments you will want to take advantage of some of the tools available to you. One of these tools you should consider is a screener. Stock screeners help you look through a number of stocks to filter out specific ones through set variables. This can be a big time saver as you try to choose stocks that fit into your ideal trading plan.
There are a few different ways you can experiment with this to find the best fit for your trading strategy. You may want to consider a fundamental analysis or a technical analysis. Whichever you choose you can find stock screeners that are free or screeners that come with a fee. Learn more about the benefits of each type in this article.
Penny stocks are intriguing to investors because of their low value and the possibility of high gains, but with the possibility of high gains comes a greater risk of scams and fraud. Because these low value stocks can be manipulated by small groups for a profit, they are ripe for unsavory and unethical activity. If you plan on dabbling in this market, it’s important to understand some of the most common scams out there.
The most common scam or form of fraud is probably the pump and dump. Put simply this is where investors looking to cash in promote a specific stock to inflate the price of it, after they have bought shares at an extremely low price (the pump). Once the price is inflated they sell their shares and get out causing the stock prices to fall, leaving unknowing investors with virtually worthless stock (the dump).
But this isn’t the only scam in this market. Another way investors manipulate this market is through chop stocks.