Stock trading and penny stocks are two forms of stock investment
that get plenty of attention from people looking for the road to riches.
They are two separate and different ways to invest in stocks, to
speculate.
Stock trading is a game of timing, an active sport. The trader makes ongoing trades trying to pick up small profits on a consistent basis. This sport is especially attractive during bull markets when stock prices are rising and volatile. The best stocks for stock trading are active issues that tend to move with the market on a consistent basis. Another favorite with traders are stocks that are in the news due to a special situation.
Stock trading is like climbing a steep mountain slope. You progress upward one step at a time, trying to avoid a major slip. One significant drop or loss can wipe out much of your past progress.
Penny stocks are a different way to invest in stocks or speculate. This is a form of stock investment based more on selection rather than on timing. Here you are trying to find the best stocks that are selling for a few bucks or less. If a $1 stock moves up 4 points to $5 you've gained 400%. If a $40 stock moves up 4 points you only gain 10%.
Think of a stock investment in a penny stock as throwing the bomb in football. It's all or nothing.
Penny stocks have a heavy down-side risk. After all, these securities are not selling cheap just because nobody is paying attention to them. There's usually a problem somewhere. If you pay $1 and a stock falls $.50, you've lost half your money no matter how much you had invested. And the truth of the matter is that once a company has a stock price in the cents vs. dollars, its chances of recovery are slim.
Stock trading and penny stocks are words that are rarely used in the same sentence. When you trade stocks you are not looking for the big hit. You are trying to get in and out with some sense of predictability. Penny stocks tend to have a life of their own, and can be very unpredictable. They can move up in a bear market when 90% of the market is down. Or they can tumble when the market is up.
One of the biggest mistakes you can make is to AVERAGE DOWN on a penny stock. As the stock price gets cheaper, you buy more and more shares to lower your average cost. If the stock recovers you make money. Odds are it will just crash and burn.
Pick your poison. Both stock trading and penny stocks are promoted by third parties with something to gain. Brokerage firms always make money from active stock traders, and publishers of penny stock newsletters make money whether their subscribers do or not.
Stock trading is a game of timing, an active sport. The trader makes ongoing trades trying to pick up small profits on a consistent basis. This sport is especially attractive during bull markets when stock prices are rising and volatile. The best stocks for stock trading are active issues that tend to move with the market on a consistent basis. Another favorite with traders are stocks that are in the news due to a special situation.
Stock trading is like climbing a steep mountain slope. You progress upward one step at a time, trying to avoid a major slip. One significant drop or loss can wipe out much of your past progress.
Penny stocks are a different way to invest in stocks or speculate. This is a form of stock investment based more on selection rather than on timing. Here you are trying to find the best stocks that are selling for a few bucks or less. If a $1 stock moves up 4 points to $5 you've gained 400%. If a $40 stock moves up 4 points you only gain 10%.
Think of a stock investment in a penny stock as throwing the bomb in football. It's all or nothing.
Penny stocks have a heavy down-side risk. After all, these securities are not selling cheap just because nobody is paying attention to them. There's usually a problem somewhere. If you pay $1 and a stock falls $.50, you've lost half your money no matter how much you had invested. And the truth of the matter is that once a company has a stock price in the cents vs. dollars, its chances of recovery are slim.
Stock trading and penny stocks are words that are rarely used in the same sentence. When you trade stocks you are not looking for the big hit. You are trying to get in and out with some sense of predictability. Penny stocks tend to have a life of their own, and can be very unpredictable. They can move up in a bear market when 90% of the market is down. Or they can tumble when the market is up.
One of the biggest mistakes you can make is to AVERAGE DOWN on a penny stock. As the stock price gets cheaper, you buy more and more shares to lower your average cost. If the stock recovers you make money. Odds are it will just crash and burn.
Pick your poison. Both stock trading and penny stocks are promoted by third parties with something to gain. Brokerage firms always make money from active stock traders, and publishers of penny stock newsletters make money whether their subscribers do or not.
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