Monday, October 11th, 2010
We like looking at penny stock picks. When you do your research they often represent a good investment. However, without undertaking research, or if you make emotional decisions, you are putting yourself and your money at considerable risk. This article looks at one aspect of penny stock picks (trading volumes), and gives you some background information on how to analyze trading volumes as part of your investment research.
As with any investment, there is still risk, and as such we only recommend investing a small amount of money that you can afford to lose. For penny stocks, we recommend that they should make up no more than five to ten percent of your investment portfolio. In other words, be sensible and use your head. Don’t invest all of your money on a gut feeling or on advice from your neighbor!
Pip Mavens Inner Circle Membership
Forex Trading Membership.
The “Pip Mavens Inner Circle” is a one-of-a-kind membership program in which I reveal the step-by-step tactics I personally use to make massive gains on the Forex market, every single day
Read More: Visit Publisher Site
We are sure you are aware that penny stocks are small companies. Therefore any of your penny stock picks are going to be in a company that has a value of under $200 million US dollars, and a share price of less than $5 US. Because of their low value, trading volumes come into question.
If you have a look on your stock exchange at several penny stock picks you will see that trading volumes for these companies fluctuate. Some days a company may have 2 million trades, the next day it may have none (or only a very minimal number). This is important to note. If there are no trades, then it means you will be almost forced to sell your shares at a loss if you need to get out of the market quickly.
If you want to make money from penny stocks then you should consider following the two steps below:
- Look at the history of the company for three to four weeks and see if trades have been made consistently every day.
- Look also at the number of traders making those trades. Is it just one or two people? If so this could represent a risk. The more traders active in a particular company the better it is for you as it means there are more people to potentially by your shares.
As it stated above, penny stocks represent some of the best investment opportunities, if you do them right. Looking at trade volumes is just one method that you can use to assess whether the stock looks like a good investment. As always use your common sense and your head.