No risk, no gain is a small phrase that suits best to penny stock exchange. This stock market trading is unpredictable yet has engaged many people with it. There is no real definition for this trading but on the behavior of most investors we can make out that these stock exchanges are trading of money below $5.00.
It is recommended for people to follow 3 guidelines if they are planning to invest in these trades despite of knowing the risk. First and foremost is to keep the trading price low. Keeping the price low will prevent the market maker from buying or selling at any price. Secondly make the trading during regular hours which will help you to elicit the most efficient trade. In this trade even a few penny difference makes or break the trade that is why it is recommended to trade during regular hours. Lastly but not the least and most important is to keep your holdings down to 20-30 positions. Building a portfolio of more than 20- 30 will make your performance gain maximum achievement whereas on the other hand if you keep your portfolio low will decrease your performance. Buying few stocks makes risk of big loss.
Penny stocks are referred to as small companies that are not traded through a stock exchange but usually trade outside the chief market exchanges. The company trades at $5 per share or less than that. They are usually traded on the counter through over-the-counter bulletin board (OTCBB) or pink sheets systems. Many specialists believe them to be risky as they lack in liquidity. Though, by using correct selection criterion may traders have profited from them. For determining the overall quality and efficiency of a penny stock consider the following things like alliances, little or No Debt, increasing profits, industry conditions, trades by company officers, news and company announcements and much more.
Penny Stock Analysis is the trading method in which you can get fast possible returns, because you can bet on the highest instability. It is more vital to find the good penny stock investments and excluding the bad ones. The biggest problem in trading penny stocks is that you are not able to buy and sell them rapidly. Sometimes the buyers are not available whenever the trader wants to sell a penny stock. This particularly happens when the stock does not have enough liquidity. The penny stocks can be very risky, so the traders should not ignore any of the selection criteria. Beware of very cheap stock as it may be more at risk to over valuation.
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