Once you start on penny stocks trading, it is important to decide how much you are willing to invest. Always keep in mind that penny stock trading is risky and may cause you to lose all of your money, so be sure to invest an amount that you can afford to lose.
After you have decided on the amount that you are willing to invest, regardless of whether it is $ 1,000 or $ 10,000, always avoid the temptation to invest all of it on one or two stocks. Why? In the first place, the whole purpose of putting your money in a stock broking account is to invest it right?
Investing all your funds at the same time may cause you to lose flexibility. This may mean fewer options when tasked with the need to respond to a rapidly growing market. This decision, may also remove opportunities to gain profit from newly acquired information that may broadcast the upward movement of one or more stocks.
In an event where you have invested all of your money, the only way to purchase rising penny stocks and eventually get back into the playing field would be to
produce new funds, meaning money that isn’t part of your investment budget. Another way would be to call your broker and see if you can sell some of your existing shares in order to buy the potential penny stocks.
The first option is obviously not a good thing to do as it can be likened to gambling rather than investing. Besides, if you are not yet sure on making money on your first investment, why would you take another risk? Just like gambling, this scenario can be compared to a gambler losing his initial funds, then buying in the game once again with money that he cannot afford to lose, a very risky act indeed.
The second option, seems more practical and sensible, although this is not what trading penny stocks is about. Good stocks investment means being able to buy swiftly if you think that a stock is about to rise, and sell quickly when the market seems to have climaxed for your penny stocks. This is done in order to maximize profit and to sell the stocks before the market falls, therefore selling stocks to accommodate investing on potential stocks does not follow this proper routine.
Maintaining a portion of your funds as liquid in your stock investment account will grant you the flexibility to move quickly in a way that the stock market conditions would dictate. An investor who cannot move quickly will miss out on potentially good stocks.
Keep around a third of your assets as cash, because this will allow you to buy into a rising market without having to dash into selling any of your stocks that may be under performing during that time. This way, you may benefit from the rising stocks and at the same time hold on to the passive stocks until they start to rise.
The ability to move quickly during a rapid rise in penny stocks may greatly influence your potential to gain profits. Keeping a percentage of your penny stocks fund liquid would definitely help you achieve prosperity and make your stock trading a successful investment; this is because having cash at your disposal will make you a versatile trader who can adapt and take advantage of any opportunity that may be emerge in the penny stocks market.
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