5 things you must know before buying Penny Stocks

1. 5 things you must know before buying Penny Stocks

2. We know stock market can be risky. The stocks can go up and with the equal pace can come down. • In the stock market, you must always follow a trading system. • The reason why most of the traders lose their stocks is because they do not stick to their trading system. • It is important to stick to a trading system and follow what it says. • Ever hear of penny stocks? Penny stocks are the stocks which are traded at an extremely stubby cost. • Investing in penny stocks is quite risky and hence you must cover up all your aces before making a purchase. • On that note, here are some tips to consider before deciding to purchase penny stocks.

3. 1. Don't peek at the share price, but look at its real value: This is one universal rule that is applicable in all the stocks, that before investing in any stock, you must assess the stock’s value properly. There are many penny stocks you would find that are available at relatively low share costs, therefore enticing most investors to make the purchase. But eventually when the analysis is made, it turns out to be not worthy enough. So, it is always recommended and is beneficial to not just peek at the share prices but look at its real value before investing.

4. 2. Monitor resistance and support levels: The trading books stated, "The support level is when shares decline to a price and suddenly goes up and the resistant level is when price ascends right to its peak only to fall down." So, what’s best that you can do is to make a 6-month chart before buying your penny stocks, and know which the penny stock jumped off. Purchase when support and sell off on resistant! 3. Check for market liquidity: Most of the penny stocks trade at shortened volumes. So, it is always the best to look for the penny stocks in the market that have high volumes so that you can liquidate if required.

5. 4. Ignore manipulated share costs: As an investor, you must always dig for the positive news and updates. There might be penny stocks which comprises of low volumes and that makes it easier for market participants to manipulate the price of the stocks. If you feel that a penny stock is ascending to the upper circuit every day without any significant news or update, it is a clear sign that some market participant is manipulating its price. If you think that a company has a good prospect in the future, you must always trust your gut and go for it.

6. 5. Do not believe success story immediately: You may find and read success stories of various companies on websites and blogs. Simply ignore them. The ones who only get convinced by the success stories, and invest, later pay the consequences. Your duty before purchasing a penny stock is to conduct a thorough analysis of the reasons that led to the increase of a penny stock and whether they host any lucrative prospects to it in the times ahead.

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