Mistakes to Avoid when Trading Penny Stocks

Mistakes to Avoid when Trading Penny Stocks

I am so tired of hearing how John made one thousand dollars into millions, or Jake took a hundred dollars and turned it into riches, and once you get towards the end of the article they are trying to sell you some type of trading program. My first objection is if you have made so much money trading stocks why do you need to charge me a hundred dollars a month for this amazing software you praise about.

Allot of these trader articles forget to mention what not to do when you trade stocks, trading stocks is very risky and no matter where you start from there will be growing pains. What I want to highlight is mistakes to avoid, which should minimize your risk and loss.

Never use real money when starting out, this is the most common mistake made by a beginner trader. Instead use a practice paper trading account, this way you get used to the way

  • Stocks Trade
  • Trend
  • Press releases are written
  • How to read Technical Analysis

I will cover these individual topics in my later articles to avoid creating any confusion. This is not even a quarter of the vital information you need to actually be successful at stock trading. Let’s not forget this is just like anything else, if you don’t work at it and educate yourself your success rate would be greatly reduced.

Let’s highlight what is the typical stock transaction. Person A puts an order inn to buy 5,000 shares at $1 per share, Person B on the selling side puts a 5,000 block of shares they want to sell at $1.05. Just like any other type of sales transaction until all parties involved are not happy with the proposed numbers it is a waiting game.

Now let’s not forget the middle men, who are the middle man in this transaction. The Market Maker, a MMs main goal and reason for existence is to keep the price of a given security from rising or dropping at a rapid pace. They are here to create a stable market, now keep in mind this does not always work out in your favor. Sometimes MMs fall out to fast, or it is said they tend to short the stock creating a downward price per share. Now keep in mind this statement “they tend to short the stock creating a downward price per share” is just a common trader meth so please don’t read into it too much.

I want to give my readers a well-rounded knowledge regarding stocks trading.