How to Day Trade Penny Stocks for Beginners: Find Out How You Can Trade For a Living Using Unique Trading Psychology, Expert Tools and Tactics, and Winning Strategies by Bill Sykes & Timothy Gibbs

Author:Bill Sykes & Timothy Gibbs [Sykes, Bill & Gibbs, Timothy]
Language: eng
Format: epub, azw3, mobi
Tags: Non-Fiction, Finance, Business, Economics, Psychology, Self Help
Publisher: Simmons Publishing
Published: 2019-05-19T14:00:00+00:00

Chapter 8: Risk Management

Since they are typically issued by small and growing companies with limited resources as well as limited cash, and because their shares are considered to be extremely speculative, penny stocks are known for being very volatile and more suited for those investors who have a high-risk tolerance. All in all, the majority of penny stocks tend to have low trading volumes and also tend to be high-risk investments. As an investor, there are some things that you need to be aware of, including some of the risks that are involved with trading penny stocks. Keep in mind that penny stocks have earned every bit of their bad reputation, but educating yourself will remove a lot of the extra risk involved.

The Risks Associated with Penny Stocks

Aside from the usual risks that come with trading volatile stocks, here are some things that you may not be aware of, even if you’re not a total beginner:

● Spam - everyone has seen it, and everyone despises it. As an investor, spam can be found not only in the inbox of your email but also through many places online. Penny stocks are not immune, either. Scammers make a lot of money by promoting sketchy penny stocks to investors that may not know that this practice exists.

● Be aware of dilution. Sometimes a company will need to issue additional stock in order to gain capital. When this happens, it usually leads to the dilution of the stock that’s already held by its investors, meaning that the stock decreases in value. This is commonplace and is not considered to be shady dealings at all, but it’s certainly something that investors need to be aware of.

● Pink sheets and the OTCBB do not have to meet minimum standard requirements to stay on the exchange. Minimum standards are in place to protect investors and as a guideline for companies issuing stock. When first starting out, you may want to stick with trading on a major exchange, because they have regulations in place which protect you and your investment.

● The short squeeze is a tricky, calculated situation where a very heavily shorted commodity or stock moves higher very sharply and forces the short sellers to close out their short positions, which only adds to the stock’s sudden upward pressure. The term “short squeeze” refers to the fact that the short sellers are effectively being “squeezed” out of their position in the stock, and they typically find themselves at a loss.

● One issue penny stocks are known for is the difficulty in finding necessary information and history about them, which makes it even more difficult to form an educated decision when trading (Staff, 2016). If you paid enough attention to what worked for you and what didn’t when you were paper trading and heeded the warnings and advice of trusted sources such as this book, you should be able to make more informed decisions.

● Penny stocks are known for not having much liquidity. This means that it can

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.