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Five things to keep in mind while trading penny stocks
Highlights Buying penny stocks in a hope of a windfall profit is a high-risk bet and only a very few bets prove right. One could also practice trading these stocks on a virtual platform first to hone their skills before putting their money on the line. Investors need to make sure that the penny stock of their interest is liquid enough to absorb their volume. The penny stock space might seem lucrative, especially looking at those multi-bagger returns in hindsight. Penny stocks often trade at less than a dollar value and more often than not, are junk stocks, which means the underlying business is almost non-existent or the company could be in financial distress. Image Source: Copyright © 2021 Kalkine Media Buying these stocks in a hope of a turnaround is a high-risk bet and only a very few bets prove right. In most other cases, the investment goes to the dogs. However, if you are keen to trade in this high-risk and high-reward space, then we have some tips for you that could come handy while managing your risk. Read more: Why Is Investing In Penny Stocks Sometimes Important - SPT, MMM, ROO Keep liquidity in check  Because of its inherent high-risk nature, a lot of big players such as institutional investors or fund houses tend to steer clear from this space, leading to a dried-up volume. Investors need to make sure that the penny stock of their interest is liquid enough to absorb their volume. A relatively higher volume of an individual than what a stock receives normally can influence its stock price, leading to an increased impact cost. Therefore, it’s sometimes better to avoid penny stocks with extremely low liquidity. https://kalkinemedia.com/education/investing-essentials/five-things-to-keep-in-mind-while-trading-penny-stocks