Rules of Investing in Penny Stocks
One of the most important things in buying penny stocks is
rules. All of the big time stock traders that had to start out
small swear by the fact that they had to follow their own set of
rules or they would fail and lose money time and time again.
For the most part, most of can't afford to lose any money
learning rules for ourselves. We just don't have the resources.
After a couple of years of learning about investing and reading
book after book I've finally come up with a simple list of rules
to follow for successful investing.
The biggest rule to keep you out of trouble is never borrow
money to invest. It's all so easy to think about making stock
trades and building up a great portfolio but here's why
borrowing money is never the answer.
For one, if you're losing money on the stock market, you'll have
to start making the payments for the loan out of your income.
For most of us, that's just not something that can be done. If
you start making money, all of the profits will go into paying
the loan back instead of into your wallet. It's going to take a
long time to pay the money back and start taking profits for
your self. This doesn't sound to bad, but remember, it's
dangerous. If you lose money at any time while you're still
borrowing, you'll be paying for it out of your income and it
will be unexpected. Always save up money to invest.
The next big rule for penny stocks is always invest in a
profitable company. Most of you are thinking, why would I not
invest in a profitable company? Most people don't take the time
to find out if the company is making money or not. The worst
thing in the world is seeing a stock that has a great chart and
news to only find that its quarterly earnings are down 15% and
its revenue per share is - 0.03, yes that's negative 3 cents per
share.
For information on how to find a profitable company and get
great penny stock picks see our published works at
www.pennystockpile.com.
The next rule to follow 100% is never buy a stock that doesn't
have attention. Volume is one of the first things that most
successful investors look at. If the stock is not trading more
than 1 million shares per day don't touch it. There's just no
point. If you have a stock that's trading 10,000 shares a day
and you want to buy 10,000 shares of this, you're going to have
an impossible time trying to sell the stock once it goes up.
Stocks need attention in order to have liquidity. This means
that it must be something that is easy to sell once it has
value. Don't get sucked into stocks that are going up and up if
you won't be able to sell them later.
Stick to these few main rules and you should do very well.