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.
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