We must note that these tips are just guidelines. There may be special situations where you may need to sidestep some of these tips. Always use your common sense.
1) Penny stocks are risky. Do not put all your investment funds in penny stocks. There is a chance, as with all investments, that you may lose all of your principle. Be diversified.
2) Before buying a penny stock do your research. Do not buy a stock just because a web site picks that stock or does a profile on the company.
3) When buying a stock always select a price point at which you will sell. This will help you to avoid the emotions and greed that comes when a stock price starts climbing dramatically.
4)Make sure you have a stock broker that is penny stock friendly. Many online brokers will charge a per share trading fee with orders whose number of shares is above a certain threshold. This is not good. Instead look for a broker who has a fixed trading fee no matter the number of shares traded per order.
5) Never use a market order to purchase a penny stock. Always use a limit order. This way your order can’t get manipulated and you control the maximum buy price or the minimum sell price.
6) Always monitor your penny stock investments on a daily basis. Penny stocks are not like your typical long term investments. Things can change at any time and price swings can be drastic. Don’t just check your investments on a weekly basis or you may get an unpleasant surprise.
7) Don’t get emotional. Only invest enough money where you feel comfortable about the possibility of losing that money. It’s pointless to invest the money if you’re always stressed out about the stocks performance.
8) Get involved in message board communities. These communities can give you ideas on investing, opinions on different companies, and more. Don’t forget to validate any info you see because nothing guarantees people are telling the truth.
9) Generally avoid stocks that have a very low daily trading volume. These stocks are ideal pump and dump type stocks where you can lose your shirt.
10) Don’t chase a stock upwards. If you try to buy into a stock that is climbing in price fast you may get burnt. There could be a sell-off that will leave you frustrated.
You are now armed to with some basics that will assist you in making money in the exciting world of penny stocks. We wish you the best with all your investments.