How To Invest In Penny Stocks For Beginners

A number of people words starting with investor journey usually begin with penny stocks. Penny stocks are basically, as the name suggests, are the company that deals at a very low share price, even less than $1. This is the reason why a number of penny stock beginners invest a small amount of capital in return for scaling it to thousands of dollars. Maybe it seems few cents per share but actually it converts into big percentage returns.

We on a daily basis, get to hear a number of questions, especially from beginners regarding "how to invest in penny stocks". Today, in this article, we are going to discuss the ways to invest in penny stocks for beginners.

So, what are we waiting for? Let’s get started:

But before beginning, I would like to warn you with a very true warning. Penny stock is also considered to be at a very high risk speculative because of the following reasons:

• Lack of liquidity
• Small market capitalization
• Limited following
• Limited disclosure
• Large bid-ask spreads

The overview of today’s article goes as:

• Understanding penny stocks
• How to narrow down the trading candidates
• Opening an account
• Understanding the risks

Let us discuss the points in detail:

Understanding penny stocks: Penny stocks are recognized as the opposite of blue-chip stocks. They are a kind of small-cap or we can say, micro-cap company that trades less than $5 per share.

How to narrow down the trading candidates: Once you understood what penny stock is all about, the next thing you need to take care of is what penny stock to buy and what stock you can trade in real. One of the most popular methods to do so is stock screening tools. The method to narrow down the trading universe is screening the stocks under the price range of $1.

From there, you can just narrow down the things according to your needs and requirements. You can even narrow down on the basis of two things: risk tolerance and strategy.

Let us understand it better with the help of an example. Suppose I am only interested in the penny stocks associated with the footwear industry. Hence, in such a case, we will do the necessary filter/ adjustments and thus would run the business. Simple!

Opening an account: A number of things are associated with opening a trading account. Some of them are depicted below:

• Customer service
• Transferring fees
• Transferring funds

Usually, brokers are specialized in skills depending upon the needs of the wide areas and opportunities. Hence, it is your responsibility to look after each aspect minutely and shop one at the last which perfectly understands your needs and requirements. The thing that is most important in penny stock investors is the fee structure. It is common for the brokers to charge high-commission based on a per-share basis. A certain rate is fixed for the initial number of shares and then the rate gets added as per the additional shares. The investors who are not so great at penny stock trades and who buy a low number of shares usually follows a pay- share structure.

Understanding the risks: It is very important to understand the risks when it comes to penny stocks trading. A number of institutional investors lack the required following up with the investment community. This is the reason why liquidity is really a serious concern in such a case. The real investors usually get stuck in a situation where they experience fluctuation all way long during the supply or the demand (enter or exit)! This fluctuation may even last for weeks or months. But with penny stocks, it is easier for retail investors to make money look strong enough or weak or even they can even manipulate the prices according to their alignment.

Read More:-https://www.linkedin.com/pulse/how-invest-penny-stocks-beginners-james-smith/

If you want to learn about penny stocks, crypto and investment in stocks, then we must say, InPennyStock is your key place. We have over more than 150+ videos to make you learn about the ins and outs of the stocks and its trading. Happy trading!