Identifying hot penny stocks and making profitable deals through them has always been a challenging task for most beginners. Though many experts might put forth the most promising ones before you, trading them is always a risky job because of their extreme volatility and unsure nature.
Moreover, with the ongoing eurozone crisis still haunting the European markets and the Obama administration trying its best to boost the US economic conditions, the sentiments of the market still require some more time before they can get back to normal. Investment experts all across the world are not very gung-ho about investment opportunities, be it in India, China, Germany, USA and other countries. Nevertheless, penny stocks, that are very risky always find a market to trade.
Be Careful While Trading Penny Stocks
The best penny stocks to buy would be from the finance and information technology sectors. Even though some companies whose stocks trade at less than $5 per share in the market might have a good business model, the chances of these stocks getting hammered down heavily in stock market crashes are high. Trading these stocks requires great reflexes and the ability to predict stock moves in advance. This can be learned only after sufficient practice and gaining self-confidence. Many times, the moves in penny stocks can be totally unpredictable and hence the chances of making huge profits or losses are always there. You should set a cap for your investments so that you do not have over exposure to these risky possessions.
Trading penny stocks online will require you to study technical chart patterns carefully. Look out for a break out or break down pattern and then think of strategies either on the long or short side. Accurate stop losses are important to avoid huge losses. Stop losses are set very close for penny stocks and they would be just below your price of purchase if it is a long position. In case of a short trade, the stop-loss would be positioned above your purchase price. You need to be on your toes always and track the stock prices regularly to emerge a winner in these high risk trades. Stock market investing for dummies is possible with the help of good stock research and experience in the markets. Conservative investors, wishing to avoid risks fully should completely ignore these stocks.
Putting your money at lower levels on a monthly or six monthly chart to efficiently invest in penny stocks. Many traders end up buying these stocks at their all time tops which in fact is the biggest mistake. The suggestion here would be to exit your positions gradually in penny stocks as and when you get substantial profits.
Penny Stocks for 2012
- WellPoint (NYSE:WLP)
- Arena Pharmaceuticals Inc
- YRC Worldwide
- LGL group
- Payment Data Systems Inc
- Advaxis Inc
- China Metro-Rural Holdings Limited (CNR)
- Ever-Glory International Group Inc. (EVK)
- Putnam Master Intermediate Income Trust (PIM)
- UnitedHealth (NYSE:UNH)
- NetSol Technologies (NASDAQ:NTWK)
While no one takes any responsibility for your penny stock investments, you need to be extra careful while dealing with them. Since there is uncertainty in the markets all across the world, this may not be the right time to invest heavily. However, we have seen from historic market crashes that such situations also bring in significant opportunities for those who have the eye to read the market and predict the possible future trends. So, if you have got the hedge to take calculated risks, you can pick up some good stocks. Now, that will require research and your fair sense of judgment.
Based on my research, I have been able to conclude that in the year 2012, the technology sector will be one of the keys to make huge profits. As we all know, the media has been religiously covering news regarding the growth of social media companies, that are now ruling the Internet world.
So, as I had mentioned earlier, you have to really invest time and energy in understanding the trends regarding penny stocks. If you are a traditional conservative investor and you don't believe in taking some good risks, you can try to explore them. However, you can avoid them if you do not wish to see your portfolio value going down at times. Good luck for your investments!
DISCLAIMER: This article is just for reference purposes and does not recommend any stock market transactions. For professional expertise, do contact a stock market expert.