The Best Ways to Make Money Trading Penny Stocks
You may have heard that trading penny stocks with high volume can earn you a lot of money, but this is not always the case. Penny stock trading, like any other form of stock trading, requires a certain degree of expertise and understanding in order to earn substantial profits. In order to learn how to select high volume penny stocks, you need to have a general understanding of the market as a whole, as well as the terminology used by professionals in the field. If you understand these concepts, then you will be able to choose the best stocks to trade.
One of the most important things that you need to know about trading penny stocks is that it is not an investment. The value of a penny stock is based upon the perception of analysts and experts in the field who predict its movement within the market. Therefore, it is not an investment in the true sense of the word, since a penny stock is not actually worth anything.
Many people make the mistake of believing that penny stock investing is akin to purchasing a bushel of tulips in a local garden center and selling it for a small profit later. This is not a sensible approach, since tulips are not sold for the amount of money that a penny stock trades for. Instead, you must understand that you are making a profit on the anticipation of appreciation of the value of the stock. Penny stocks are like this in a number of ways. First of all, they are priced very low, making them a good target for those who are looking for quick profits; and second, they come up fairly frequently, making it possible to execute a buy and sell action at any time.
There are two common types of penny stocks: the blue chip and the red chip. Blue chip penny stocks are those whose price has been consistent over the years, and who, with some luck, have managed to increase their value despite changing market conditions. These stocks represent a legitimate investment opportunity, even though they do come with some risk. The main advantage is their high volume, which can represent a substantial market on its own. It also means that there are a lot of buyers and sellers interested in these stocks, which tends to drive up their prices. Because of these factors, blue chip penny stocks tend to be easy to find and sell, and can thus be bought and sold quickly.
Red chip penny stocks are a bit trickier, because unlike blue-chip stocks, whose prices tend to drop a lot when the market changes, they don’t usually follow a consistently profitable pattern. That said, though, they are still easy to find, and some investors enjoy them for their low volume and high volatility. It’s important to remember, though, that if you’re going to take a chance on a red chip stock, it’s best to do it with a long term investment plan. Buying and selling penny stocks too often could erode your gains, and you might not always see the full profit you had expected. If you want to make money buying and selling penny stocks, it’s a good idea to build a system first.
One of the easiest ways to invest in penny stocks is to use a ‘picker’ program to decide which stocks to buy, where to put them, and when to sell. Penny stock programs can help you make money with penny stocks by ‘gearing’ towards those investments which have the best chance of rising – so that you only spend money on them when they’re likely to grow. However, it’s important to remember that not all programs work the same. Some will be better at choosing the right penny stocks for you than others.