Earn money in Penny Stocks

First word of caution... A STRICT WARNING - Contacting the ones sincerely advise you all against investing in penny Stocks.

One associated with your basic rules of buying Stocks is to consider 'value'; not 'price'. However the starting point is actually price, you are committing become the fundamental investment mistakes.

Unfortunately, simple fact, the gambling instinct in humans is very strong. So despite knowing the risks involved and all of warnings, people do get drawn to penny Stocks. The lure of hitting a jackpot is irresistible.

So I decided to grant five simple rules manage penny Stocks.

If you choose ignore my warning, kindly well , remember these rules. Going through the risk-reward ratio, the percentages in penny Stocks are heavily staked with common investor. While these rules will not guarantee 100% success that contains penny Stocks, they will nearly improve your odds.

1. Invest only the minimum in penny Stocks

It is psychologically comforting to get Stock of say Company X pricing Rs. 15/share, rather than Company A's Stock have been around for say Rs. 750/share.

Second, appears more logical and in a position assume X doubling oh no - Rs. 30 than say over to a to double to Urs. 1500.

And third, with small quantities of money (say Rs. 15, 000) you more shares of X (1000) than only a (only 20). So also a Re. 1 gain can offer a profit of Urs. 1000 in X favoring the use of Rs. 20 in THE BEST THING THAT.

Therefore, low-priced shares looks relatively easier way generating money.

However, don't forget that if you can easlily make 100% (or this kind of more) profits in FINANCIAL TIMES, it is equally on the way of even lose 100%. History endorses Rs. 15 can naturally become Rs. 7. 50 and you get rid of 50% of your investment abruptly. But it will be challenging for A to go down to Rs. 375. (Moreover, involving good business, A will recovery, while X may consumed. )

Hence, do not invest may well 3-5% of your corpus disturb penny Stocks. Anything almost close to 5% is committing hara-kiri.

2. Extensive involvement

One noteworthy problem with penny Stocks is a deficiency of information - especially reliable information.

In the absence of credible top tips on the company, its controls, operational numbers etc., additionally you can easily difficult to make the actual judgement. In such an issue, choosing a penny Stock is actually looking for needle the haystack.

You have to really hunt for the Stocks in which are 'truly' undervalued. With large number investors, thousands of brokers and people analysts - whose customer hits bread & butter come from the Stock Market - it is very simple difficult for a good scrip sign on penny Stock physical fitness. Only a seasoned day-to-day investor is in a position to detect such Stocks before they're discovered by the subject matter.

You may have learning 20-30 companies (maybe even more) the moment find something promising. This is always a make any compromises this really is essential.

3. History of the trading volume

Let's say are likely to lucky and X does head off to Rs. 30. Congratulations! You are sitting on 100% income. But beware - by visiting sell, you may undoubtedly find any (or ok number of) buyers.

Penny Stocks are very illiquid. A large perhaps the share-holding is owned the promoters who may readily be prepared to be sellers. But this comes to buyers, you won't find many of them.

The fact that you are buy more quantity since price is cheap (as you and me earlier saw 1000 gives you of X) compounds the difficulty. Selling even 100 such shares is quiet difficult; so selling large quantities is impossible.

As such, it would be prudent to study the trading volume close for last 6 months to 1 year to check whether it is consistently high. Uneven spurts in volume definitely signs of manipulation more than high liquidity.

4. Straightforward to manipulate / biased recommendations

Unlike big Stocks, penny Stocks are apt to manipulation. And, given that most of us buy merely the actual internet word-of-mouth recommendations (our luxury for hot-tips), the job of unscrupulous dealers become quite simple.

Do not get captivated by hyped-up media trading accounts through newspapers, television has revealed, newsletters etc. Don't go by casual remarks alongside train or on the job or at the social gathering. You must do your own research... thoroughly.

Think twice - no thrice - why then someone is recommending an unknown Stock if he's got so sure of freebies. Isn't he likely yield beg, borrow or steal to get that company rather than recommend it to you?

Thousands of investors have been duped prior to now. Do you wish for that next victim?

Do not - Rewind, do not - believe that on any tips; especially an excellent penny Stocks.

5. The myth of 'It don't go any lower'

There generally is a temptation to invest if your Stock prices correct sharply and can be suppose trading at 52-week little. We tend to think 'it can't go that lower'.

This is fallacious.

If the company is the one about facing serious business trouble; or the promoters have siphoned away the financing; or the manipulators have definitely made their riches, the Stock price you'll need recover again. You may forget your investment your Stock. In fact, during time the Stock exchanges will de-list these kind of people so you can't even flip it that Stock.

Therefore, require a very strict stop-loss works with. Don't live in truly.

Investing in penny Stock poor credit injurious to your financial health. So it may be best to stay away from them. However, if you've been still a game for it, tread (and trade) with exercised. Please do take good care of your money.

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