Who wouldn’t be enticed by the possibility of making a living trading penny stocks? Could you quit your day job and make a living through the stock market? Could you sit in your pajamas in a mansion, trade using your computer, and live the dream? The short answer is that you could. Keep in mind, however, it doesn’t mean you would. Learn more about the many factors that go into successful penny stock trading.
Understand How Penny Stocks Work
Image via Flickr by Got Credit
Having success in trading any type of stock is dependent on an individual trader’s ability. You can make a living by trading penny stocks if you are smart about trading overall. To do so, you need to start with research.
A penny stock is a stock valued at less than $5 dollars. While companies behind these types of stocks are generally small companies, trading penny stocks nonetheless involves a certain amount of volatility. Although it is not investing in the traditional sense, you need to stay informed when you invest in penny stocks.
Find a Mentor
One of the best steps you can take as a beginner is to find someone to guide you. While a learning curve exists, acquiring a mentor to show you how to invest in penny stocks can be the difference between making some extra income and making a living. If you try trading with only your research behind you, you can probably make a supplemental income; however, you’ll have to be patient while waiting to get a decent return. With a knowledge source, you can go from making some spare change to living your dream.
Ignore the Hype
Taking this advice is probably the hardest thing to do when you’re starting out. Don’t get caught up in success stories. You can’t buy stocks like lottery tickets and expect to get a steady, decent return. You may end up getting some extra income, but your chances of becoming one of the success stories with a sole income source will drop significantly.
Don’t Get Attached to the Stocks
If you want to get some good returns and build a steady income, then you have to remember to sell quickly. You can’t hold out for a better return or get attached to any one investment. The reason penny stocks can be so lucrative is that they give you the availability to earn a 20 to 30 percent return in only a few days. You have to remember that you are investing minimal amounts, and you can’t hold out for off-the-chart results and take it where you can get it.
Penny stocks are not for everyone. Trading can be a lucrative career path, but only if you are willing to put in the work. Just like everything else worth achieving in this world, being successful doesn’t come without some effort. Nonetheless, if you put in the work and “play the game” smart, you could be one day sitting in that mansion of your dreams through smart trading strategy.