Everything you need to know about penny stocks.

Online Stock Trading Guide

Make Sure Your Penny Stocks are Tradable

Making sure your penny stocks are tradable is one of the most important aspects to be aware of when buying for short term profit. But it is one that is very often overlooked. After all you can make all the profit that you like on paper but at some point you have to be able to cash it in and bank the money.

When you are considering an investment in penny stocks you first need to assess not only the potential earnings that you may make. But how easy it will be to offload or sell the shares when they reach what you deem to be a good selling price. You also to be able to sell them quickly before the price begins to drop.

This speed of transaction is essential in the volatile world of penny stocks trading. If you miss the peak-trading price by hours, let alone days, then the price may start to drop sometimes very quickly. Your hard-earned profit may quickly turn to losses and fall even further if you have to drop the price to encourage a disinterested market.

The best way to avoid this is to carefully check the trading volumes before buying the Penny stocks. If the volume is low then it is possible that you will have trouble selling the shares when you need to. And even if you can sell it may not be quick enough to ensure that the profit that you have accrued remains stable.

Even worse is if the penny stocks start to go into free fall. Then your chances of offloading a falling share that also has a very low trading volume even when performing well are negligible. If the trading volumes are not sufficient to allow you to sell your penny stocks when you need to, then you could have to sit in front of your screen watching your profit (and maybe your original investment too) disappear.

This can, of course, work the other way as well. If the penny stocks you bought have a rise in value, but have a low volume of transactions normally then this can even be exacerbated. If there are very few trades at the normal price and other investors deem the price that you are selling at to be at the top of its probable value, then you may find it very difficult to sell the shares.

Although the volume of trades in the penny stocks is not directly an indicator of profitability or otherwise. It is an important factor when you are deciding whether to invest or not. It can still be a good idea, if you see potential, to buy into penny stocks with low trading volumes, but you do need to plan your decisions well in advance.

If you have any doubt about the market movements of your penny stocks, especially if they are in profit, then it is best to start planning your move early. That way if you think you need to sell, then you are already prepared and can start the process as soon as you have decided. This gives you a little more breathing space if it is hard to find a buyer and you need to drop the price.

When investing in penny stocks it is not enough to just make a profit on paper. You also have to make sure that profit is bankable. The most important thing when trading penny stocks is that at the end of the day, you have to be able to realize the paper profits and turn them into money in your bank account. And you will only be able to do that if you can sell your penny stocks at the right price.

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