Penny Stocks Profits

Penny Stocks Profits For the Taking

Penny stocks can be a highly affordable and profitable way of getting into the stock market if you do it right; and can lay the foundations for a good second income to supplement your monthly paycheck. But as with many aspects of the stock market, timing can be everything. Get it right and you’re in clover. Get it wrong and all your hard work may be in vain.

Penny stocks are, by their very nature, prone to swings with prices making large movements both up and down, often in a very short space of time. All of your penny stocks buying and selling should, of course, be based on sound research both of the market and the companies’ recent history. How the company is doing in terms of profitability, whether they are just about to, or have just announced profits, losses or new patents, discoveries and products, can all affect your decision on whether, or not, to buy.

Knowing the right time to sell your penny stocks however can sometimes seem, as much an art as a science, although getting it wrong can be fatal. Many people seem to put all their research efforts into knowing what penny stocks to buy and when to buy them.

Often the decision to sell is arrived at in a much more arbitrary fashion. This usually falls into one of two categories.

For instance when the penny stocks start to show a profit they sell immediately and take the cash in case it drops again. If there is no great forethought or indeed research as to if the upward trend is likely to continue how do they know if they have made all the profit possible. If they get it wrong and sell say when a lightly traded $.50 share moves to $.70, they very often do so without any research into the reason for the sudden 40% increase in value.

If for instance small software company that is being traded as penny stocks announces a revolutionary new product and their value suddenly jumps. It may increase even more if after the mainstream software industry investors have digested the news they have found no obvious competitors. And if they believe the company is about to get a huge windfall in sales. In this scenario you could be making a small profit on your penny stocks instead of a substantial one. Making a profit is always good but you need to be sure you have made the most of it.

Then there is the other end of the scale, when a trader holds on to his penny stocks for to long and loses the profit when the shares peak and start to lose value. This is usually for one of two reasons.

1. That the trader is playing an endgame where he believes that if he just holds on a bit longer then the penny stocks are bound to rise a little more.

2. He has bought some penny stocks that either are rising or he believes will rise, and then doesn’t check to see what is happening. It is very easy to get distracted if there has been no great movement and to assume that it will stay like that, or simply to forget to check back for a few days.

There is if you go about it the proper way, a great deal of profit to be had from trading in penny stocks. But you have to know not only what to buy but also how long to keep it and when is the best time to sell. The answer, as with most things in the world of finance, is good information and research. But that doesn’t end when you buy. Find out why your penny stocks are rising and this will put you in a much better position to know when to sell.

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