It is easier than ever to trade penny stocks. There are tons of brokers out there, 24 hour access to the markets, news and information and an online infrastructure that can keep you informed of your positions and investments on your mobile phone. But the question is, how safe it is trade penny stocks? How advanced do you need to be as a trader to make penny stock trading profitable.
Penny stocks are best left to intermediate and advanced traders. There is not much that novice traders can do in the space. As an aspiring day trader, you need to find your way to the right day trading education site in order to find the best ways to get good at day trading. It takes studying e-books, online videos and online tutorials to start to understand the world of day trading. There is very little that you can learn by taking a chunk of money and winging it by trading penny stocks with no experience.
To be able to build real wealth so you can take on the risk of penny stock trading, you want to follow tried and true steps to create passive income. One of the best ways to become a master wealth builder is to drop your living expenses as much as possible, while upping your ability to earn more money. Low spending and high income will create the conditions necessary for wealth building.
As you consider ways to bring down your personal spending, think of ways that you can invest that money into long term investments that will throw off enough interest to fund real life activities. That will give you a nice base to work from, when you want to invest in slightly more risky prospects like penny stocks.
Day traders consider any stocks that run from $2 to $10 in share price to be penny stocks. That means small cap companies that are not generally listed on the larger exchanges. The way to really squeeze profits out of these is to look at overall trends in prices that could be figured out and capitalized on with large positions. When you take a large position in a penny stock, then even a 10 or 20% increase in share price could result in profits.
When you are looking at the biotech, fintech and internet sectors, these companies represent very speculative stocks. The upside or downside is very large, in either direction. It pays to be extremely careful when you are in these stocks. Risk management is very, very important for being a penny stock investor. YOu need to be able to avoid the super large losses while racking up medium sized wins. Keep your profit to loss ratio at 2/1 and you will come out ahead most weeks.
Do you have what it takes to be an actual day trader? Stop by the Warrior Trading Facebook page to find out. It pays to practice before you actually make that call. Find a paper trading simulator that allows you to practice trading with virtual currency so you can make all the typical mistakes without losing actual money. That is your first lesson in risk management.