Friday, March 4, 2011

Tips Successful With Penny Stock

Tips Successful With Penny Stock : So you are aware of the harm posed by penny stock tips. However you are still determined that there are benefits to trading and investing in microcap shares, one of which is the possibility of reaping a tidy profit with just a small investment capital and in a short amount of time. As the saying goes, no risk no reward.

Although penny stock tips can burn you badly, it is recommended that you take the following advice strongly to minimize the possibility of suffering a loss and maximizing potential profits from the investment. These recommendations are all qualitative in nature.

Knowing your stocks.
This is one of the principle rules in stock investing, knowing what you buy. This statement means that you only buy the stocks that you know inside out. You must have sufficient information regarding the stock, the company behind it, the profit and loss in recent years, future business direction etc. Furthermore, you should not rush into these penny stock tips but rather observe the stock movement over a period of time before you take the plunge.

Keep calm

If you do not have patience, then you are not suitable to trade in penny stocks. A lot of penny stock tips come from analyst poring over the company or industry numbers, press releases and other information relevant to the stock. Although the information is accurate, the interpretation of the information by different people will yield different results. Therefore it might be tempting to buy into positive press releases or analyst reports, it is better to keep an open mind and read a lot of alternative information before making your decision.

Calculate all transaction cost involved
The price of the stock you are buying is not only the price per share multiply by the quantity you bought. There are brokerage commissions, execution fees and taxes which can eat into your profits. You might think you have made a small profit but when you add up all the incidental cost, you would probably have just broken even or suffer a small loss.

Plan Ahead
Whenever you want to enter the stock market based on penny stock tips, you had better have a plan. There should be an entry and exit plan. Without a strategy and sticking to it, whatever profit can turn into a loss quickly because penny stocks are extremely volatile and investors should not be greedy.
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