Buying Penny Stocks As An Alternative Investment

Buying penny stocks is an alternative way to invest for those with limited funds but a desire to invest. Anybody with a lean investment portfolio can invest in them because they offer great  daily prospects. A good investment strategy that one can choose is the penny day trading stocks.

Essentially, penny stocks  are stocks trading for less than a couple of  dollars. They are usually excluded from the main stock exchange but one can get them over the counter (OTC). There are two ways of buying penny stocks. You can either  buy them through a brokerage firm or through a brokerage service account. The former option involves dealing with a penny stock broker. Negotiations for the number of shares, buying price, and the commission is settled via telephone.

The penny stock broker facilitates the acquisition of the penny stocks on your behalf. It is important for you to communicate frequently with your broker and decide on what you want or do not want. When buying penny stocks, you  should have sufficient knowledge and seek advice especially when investing for the first time.

Trading in penny stocks is both a lucrative and a risky undertaking. It is lucrative because it has good prospects which means greater returns. However, the risks involved are inherently greater. Investing is ,as a matter of fact ,a risky venture where stakes are higher with greater investment.

Day trading of penny stocks is an on going activity which involves buying and selling stocks. An astute investor  can manage to hold cash both at the beginning and end of trade. In effect, this means you can have greater liquidity of your investment through the cash you generate in a day.

At all times ensure that you determine the liquidity of the penny stocks before you invest in them. This means looking at penny stock trades with regard to volumes. Significant margins of trade can alter your returns so go for penny stock with high volumes of trade.

Range Trading is a viable investment option where your is aim to buy when prices are at the bottom and sell when they are at the top or thereabouts. At a constant, stocks will often trade in a given range per day.  If you adopt this strategy, check for stocks that  trade  quite consistently daily.

Another good method of trading in penny stocks is trend trading. As the name suggests, it involves buying and selling on the basis of  identified market trends. Well, this can be profitable because a technical analysis guides your trading. This also works for those stocks that fluctuate in value. Every time the stock takes a downward trend you should sell it and consider it once the prices stabilize or bounce back.

Another strategy  that is commonly used by investors  is buying penny stocks at the announcement of good news about them and immediately selling them once the news of the stock  is negative. This form of  trading can be realized by observing trends in a real-time news. The returns from trading online in penny stock can be good, however, to limit your risk exposure it is advisable that  you manage your  risk by using stop loss orders.