By Paul Fortson
You might have heard that trading stocks is extremely risky, but these penny stock tips might help you reduce the risk and getting started on a positive track towards being a winner. This type of stocks are loosely categorized businesses or establishments with share prices of under $5 and with market caps of below $200 million.
Tips On Reducing Risk
So why are penny stocks widely looked upon as a dangerous investment? The thing is, they are highly volatile. In addition to that, many company insiders simply want to make it look as though the business is doing great even though it is not. This can be seen in bulletin boards, blogs and chat rooms. Many new traders fall into hyped up stories about a company, which are really just scams. Of course, if you look past these red flags, you are likely to lose a lot of money. On the other hand, if you know exactly what's going on, you will minimize the risks involved and get closer to the high rewards of stock trading.
Getting Started
Gain a minimum of one year's experience with the middle and large cap stocks initially. You should be very familiar with studying an income statement, balance sheet and cash flow statement within this period. You should then be quick to determining which stocks are of value and which should be thrown out of your list immediately. Simply avoid companies in industries you don't really comprehend and even those you aren't interested in. If you get an e-mail about a "suggested" company, it is best to assume such an e-mail is the product of paid promoters who are just trying to sell shares of that company. Also stay away from companies that have under $10 million in revenue yearly. Of course, don't work with stocks that aren't traded on one of the main US exchanges.
Research
Find businesses that have regularly produced income and are persistently growing their free cash flow over time. The businesses you choose shouldn't have a heavy debt load. Purchase penny stocks at a very low multiple on the business' cash flow. It would be better under six times. Rather than share prices, compare price per share against book value per share. Create a boundary in any small stock to 5 percent or less of your portfolio.
Continue to study about penny stocks and going through penny stock tips. Knowledge and experience is the key to success in this market.
http://www.pennystocklist.org/
Tips On Reducing Risk
So why are penny stocks widely looked upon as a dangerous investment? The thing is, they are highly volatile. In addition to that, many company insiders simply want to make it look as though the business is doing great even though it is not. This can be seen in bulletin boards, blogs and chat rooms. Many new traders fall into hyped up stories about a company, which are really just scams. Of course, if you look past these red flags, you are likely to lose a lot of money. On the other hand, if you know exactly what's going on, you will minimize the risks involved and get closer to the high rewards of stock trading.
Getting Started
Gain a minimum of one year's experience with the middle and large cap stocks initially. You should be very familiar with studying an income statement, balance sheet and cash flow statement within this period. You should then be quick to determining which stocks are of value and which should be thrown out of your list immediately. Simply avoid companies in industries you don't really comprehend and even those you aren't interested in. If you get an e-mail about a "suggested" company, it is best to assume such an e-mail is the product of paid promoters who are just trying to sell shares of that company. Also stay away from companies that have under $10 million in revenue yearly. Of course, don't work with stocks that aren't traded on one of the main US exchanges.
Research
Find businesses that have regularly produced income and are persistently growing their free cash flow over time. The businesses you choose shouldn't have a heavy debt load. Purchase penny stocks at a very low multiple on the business' cash flow. It would be better under six times. Rather than share prices, compare price per share against book value per share. Create a boundary in any small stock to 5 percent or less of your portfolio.
Continue to study about penny stocks and going through penny stock tips. Knowledge and experience is the key to success in this market.
http://www.pennystocklist.org/
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