The following is unsound advice that will lead to exceptionally risky investment decisions. Never invest money that you can't afford to lose in this manner, and consult many other sources before taking action.
Small cap an micro cap stocks go up and down. Here's how you can benefit.
Steps
- Success in small cap & micro cap stock trading like with any other business in life comes from being able to see the big picture and from paying attention to the small details.
- Let's say for example that you are a business owner and you have a jewelry store on a given street just like the guy in the other corner does, but still the other guy is making 5 times more profits than you are only because he's doing something different. He knows something that you still don't and that's what makes him more profitable.
- The funny thing about this kind of situation is that you could be just a small distance away from being as successful as he is.
- We know that day trading small cap stocks with momentum is not the only way to make money in the stock market. But it can be the fastest way when you do it right.
- We also understand that a lot of people shy away from short term momentum trading and think that only a few traders can profit from it. It's true. Only those short term traders with proven knowledge have the ability to profit consistently when stocks go up or down.
- You don't necessarily have to trade small cap stocks with momentum all the time. But you can learn how to take advantage of them when you encounter with the best opportunities and at the same time limit your risk.
Tips
- Look for chart in day trades and wait for half of a day to see the trend of any stock. If that stock goes up initially, short it and if that stock goes down, pick it at bottom (you can guess the approximate bottom of the day with some practice using daily up down averages). Even when this strategy doesn't work, the losses will be very small.
- Profitable day traders recognize that penny stock trading is among the greatest ways to harvest BIG piles of cash in the stock market.
- The problem is that if you don't know what stocks to look for and how to approach them while limiting your risk, you won't even get close to making some profits.
- You don't necessarily have to trade hot small cap & micro cap stocks all the time. But you can learn how to take advantage of them when you encounter the best opportunities while at the same time limiting your risk.
- Penny Stocks are among the most volatile and most manipulated form of investment in the stock market.
Warnings
- Remember, that success in investing comes through the growth in value of your stocks. It doesn't matter whether you have 100 shares of a $10 stock that appreciates 10%, or 1000 shares of a $1 stock that trades up 10%, you will have made 10% on your investment.
- Small companies rarely pay large dividends. The capital can in theory be best used by reinvesting in the business. This means that small cap investments must rely on capital gains for the investor to profit. This increases the risks to the investor.
- Beginners should be cautious in starting out with stocks trading near $1 or lower as these are the most often abused and over-hyped investments in the stock market today.
- Smaller companies, known as penny stocks should be an investment arena that the beginner avoids. High levels of volatility, low levels of liquidity and limited available information are issues that require serious investment ability to overcome. Whilst these can be overcome, people with a limited budget or lack of knowledge will be taking very high risks to invest.
Article provided by wikiHow, a wiki how-to manual. Please edit this article and find author credits at the original wikiHow article on How to Pick & Trade Penny Stocks Successfully. All content on wikiHow can be shared under a Creative Commons license.
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