You should ask yourself whether day trading in penny stocks is a wise move for your investment activity. Whilst some people are drawn to penny stocks there are others who will avoid penny stocks as much as they possibly can. The reality of penny stock trading isn?t that of the legends where a trader will get lucky on there first stock and make masses of money, many traders lose loads before they come across a stock that will pay anything back.
Investing in penny stocks is a notoriously risky business allowing you to either reap massive wins or sustain massive losses. Many people become entranced with penny stocks when they hear stories of investors, gamblers really, making a million dollars in a few days of trading but they don?t realize that many of these traders will have most likely lost it all within a few days of gaining it.
No matter what you think on the subject penny stocks are no more than gambling dressed to the nines. This can be a lucrative gamble if you know what you are doing and if you don?t then you need to be very lucky to avoid losing lots of money. The reason for penny stocks volatility is simple, the companies who are selling their stocks for less than $1 are in this state for a reason.
You can trace these problems back to either bad management, bad economics or events conspiring with poor managers. Before you invest in this cheap stock it is vital that you have a valid belief that this company will managed a turnaround and make you investment worth it.
Day trading penny stocks is so risky because it doesn?t take much to affect your investments. For example, you buy into a company for 25 cents a stock and then the stock price rises to 50 cents, you?ve doubled your gain quickly. It is important that you remember that stocks can go down as well as up.
A 25 cent swing is nothing t sniff at when it concerns your normal stocks, but when it applies to your penny stocks this can make you a lot of money or lose you a lot of money. This means that you should learn how to spot companies with a great potential to turn themselves around before enter this fast paced world.
You should always remember that most of the top investors in the world invest in stocks that are stable and have a long history of doing well and have shown long-term profitability. Instead of investing in companies that are doing well, you are investing in companies that have shown that they can?t do well in business. Okay, sometimes turnarounds and miracles happen but not very often.
To successfully trade penny stocks you will need to become an expert at picking stocks that are about to pull a turnaround and know when is the right time to get in. Making money through day trading penny stocks is not impossible, but it requires you to know what you are doing to monitor your investments closely at all times.
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Source: http://www.trilhasdisney.com/is-day-trading-penny-stocks-worth-the-risk/
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