Low-priced shares and penny stocks are not good for everyone in spite of the fact that they have many good features. You truly can earn much by investing little (to be fair, as well as lose everything). For many people the opportunity to earn much does not outweigh the risks. Be always honest with yourself and do not trouble by refusing from the whole concept. Generally speaking, this is usually the best choice, because almost all situations with penny stocks end up with losses for many investors.

However, there is good news about this. It is very easy to avoid great losses incurred to some investors when trading penny stocks. Many investors lose their investments, because they buy the wrong stocks, at wrong prices, and, as a rule, for wrong causes. This makes them hold on such stocks for quite long.

For instance, almost all investors buying penny stocks traded on OTC (the over-the-counter) are likely to lose their funds. On the contrary, the investors buying famous companies on major US stock exchanges are more likely to become more successful. These are basically serious companies that have proved the efficiency of their business models.

Penny stocks whose price is less than 5 US dollars per share will most probably include the companies that have overcome hard times. In such a way investors display their doubt that the company will survive. But for their doubts, the share price would be higher.

However, if these companies have shares on large US stock exchanges, they show that they have enough knowledge about the market and the relevant resources for attracting investors. Besides, they show that they have a chance to improve their business prospects. Successful investors in penny stock are sure that they must search for the signs that prove the business turnaround.

Honest Guides and Risk Money

Invest only in penny stocks with risk money or that amount of money you can easily lose. Besides, start dealing with trading penny shares only after acquiring the relevant knowledge and understanding the potential volatility you can find the investments traded at the lowest prices possible.

Follow the industry experts. He can help you to avoid mistakes and you can make use of his experience. This is true regardless of what it goes about: penny stock, repairing an apartment, jogging, cooking, etc. Your results will entirely depend on your guide. When you start trading penny stock, you have several potential mentors. Some of them can be much better than others.

The majority of them (pay attention to this, because it can be a very important warning sign) will tell you about private planes and luxury cars, although that may not have the ones. These promises remind a lottery ticket: do this and that, trust this or that man and you will have a private plane like everyone who does it.

Heavy Metal Lottery Tickets

People usually want a few hundred dollars to turn into their financial independence and happiness. That is why they are off guard and start believing promises. This explains why the “robot picking stocks” is successful, as well as why the Iraqi Dinar, marijuana penny stocks, binary options and others are popular.

For more relevant and recent examples, just think about Dot Com Bubble or Bitcoin at 20, 000 US dollars.

Whatever happens to Peercoin, Gridcoin (founded by Rob Halford, heavy metal singer of Judas Priest), Primecoin Darkcoin, Namecoin, etc., don’t forget about promises of lottery tickets. Good investments in trading penny stock require knowledge, work and courage.

Begin with Paper Trading

It is possible to avoid big mistakes if you learn to trade by suing the risk-free method for trading penny stock that does not require money. This method is also known as “paper trading”. You only need a pen and paper to monitor imaginary trades in real stocks and use an imaginary money portfolio.

Probably, this will be the best you will ever do about penny stocks. Monitoring the imaginary profit on your imaginary paper trading, you can dive into real money having more knowledge on this. This will also help you to learn the relevant vocabulary on penny stock, analyze your mistakes and realize what to pay attention to when trying to find the next winners on trading penny stock.

After paper trading for several months, you are sure to become better in many respects when you will have to trade speculative shares.

Choose the Type of Companies to Focus On

A lot of investors make a mistake when they invest in the latest industry. Usually all you know about it is that it is on everyone’s lips. It is told about in news, your hairdresser mentions it, your friends insist on investing…

The problem is that you are not the only one who is aware about this industry. Its popularity reaches everyone, and thus trading has already become overcrowded, matured and strongly overpriced.

It means that the next step for the latest industry is almost always downstairs. As soon as it comes to penny stock, the transfer from the present to the former fad always causes considerable collapse of all penny stock in this industry.

Keep in mind the old saying “Buy what you know”. If you are in medicine, make use of your advantage in bio-technologies stock. If you are in IT, choose among technological companies. Or you can merely buy something you are the most familiar with after readings and observances of the environment.

Your Passion

Are you now quite sure which types of business make you most advantageous? Just have a look at your subscriptions and take a decision what you are involved in most of all. Mountaineering? Fashion? Diving? Maybe, gold mining?

As a rule, people do not want to get involved in their industry. Instead, they focus on something that will be the most valuable for them. When they do this, they refuse from their advantage they even did not suspect of.

Human Nature

This is the human nature, and it is quite natural that after your working day the last thing you want to do after it is to focus on anything related to it. Far from always, but quite often cooks do not cook at home, and online entrepreneurs do not surf in the Internet.

However, you can benefit from refusing from this psychology. Concentrate on the corporations and industries you know best of all. When trading penny stock, make use of all advantages.

How to Involve Prospective Investments?

Find a reliable source you trust and use it as a starting point for searching for potential investments and buying penny stock. In fact, you may have many sources.

Remember that you must never entirely trust any source. Use them only as a suggestion for considering. Make your own analysis, make your own trades, and undertake the responsibility for all possible results.

It is possible to find many stocks with the aid of a stock screener like FinViz.com (Financial Visibility). This is a wonderful online tool to detect potential investments. You will understand it better the more you try it. Besides, the more you trade on paper, the more you will learn about investing.

There are also perfect online programs for screening stock. You can use them free of charge like Google and large financial portals. If you want stock of the precious metals industry to be traded at 3 US dollars or even cheaper, you can set up the screener to display only these results. In this case you will get a great short list you can use to find the stock for trading.