If you are a keen trader of penny stocks and willing to learn and explore the stock market world, you need to understand the basics first. Understand the market and then make a move. A huge population has developed an interest in this area in recent years but the success rate is not a big number.
You must be wondering why, so let me tell you the answer to this. People neglect the most basic rules and rush to the target of easy earning. So, we will discuss the most basic things you should know before getting into Penny Stock Marketing.
You must have heard people say, to gain big in the stock market, you need to buy the right stocks and the right time.
It means to buy penny stocks before they spike. But unfortunately, there is no guarantee that can tell you how the stock is going to perform in the future. So, if you are gifted with the ability to tell when a spike is going to occur, you are said to be very talented in the penny stock market.
But talent and guesswork aren’t the only ways by which you can know and predict when a spike is going to occur.
After talking to penny stock traders, who have been into trading for many years now, and asking them their secrets and hacks to identify when a stock is about to spike, I have listed 4 golden rules they use. These rules have also been accredited to help them get successful in the penny stock game. But, before you start, don’t forget to research some crucial financial ratios about penny stocks.
While these are the golden rules, there is still no guaranteed way with which you can identify stocks before their spike.
- Watch out for the stocks that are already moving
Stocks that already have a bit of upward movement are the best penny stocks to watch. Most stocks don’t take big jumps. Well, of course sometimes there are stocks that spike a lot more than your expectations, but the movement isn’t sudden.
Before taking a big leap, the penny stock usually moves in small steps, and if you identify it, you can piggybank over it.
- Potential Breakouts and new highs
Always look out for stocks that are touching new highs. This rule is even more applicable for those that are still up on the day and holding the morning high. But it is not so easy, you still have to be careful.
For instance, it is a Friday afternoon, and the stock is still holding its morning high, a potential short squeeze is never far away. The key here is to learn to avoid Friday short squeezes, to make the most of this golden rule.
- Bet on Stock’s Price Action
Whether the stocks are going to break a new high or whether the volume-weighted average price has been crossed and similar actions cannot be learned by news channels, but by the stock’s chart movement.
So instead of hitting your favorite news chat rooms and going for stocks that other members are thinking are moving high, bet on the stock’s price action.
Well, your method might be effective, or listening to a guru might be fruitful, but nothing except the price action can give you a real insight into a stock.
- Most importantly, do your research
There are no secrets and there are no get-rich-quick hacks either. The real gain is in the hard work and only then success follows.
You cannot be lazy and expect that you will only buy penny stocks right before they spike up. You cannot not do your due diligence and expect you are going to take the stock market by storm.
If you want to just pick one out of these 4 golden rules, it should be this one: Research. None of the above golden rules will work if you fail to do this. Trading in penny stocks isn’t just about buying stocks because you read about them online. There is more to it. A LOT more.
Penny stocks are quite dynamic, and now that you have made a decision to trade in, I wish you all the best. You will surely make profits, if you keep up with your research and follow the other 3 golden rules, of course.