Ways to Trade with the Volatile Penny Stocks
What is Penny Stock?
The stocks which are often traded at a very low rate have extremely low capital in the market, usually listed in the smaller stock exchanges, and they are significantly illiquid. The penny stocks are extremely speculative, and they are considered extremely risky as they lack liquidity, vast spread in bid-ask, explicitly small number of shareholders and insufficient disclosure of information.
Generally, the share which trades below $1 is regarded as penny stocks. However, the company shares which are also valued less than $5 are Penny Stocks. Mostly Penny Stocks are extremely risky, but a few of them have the possibility of turning a relatively small investment into a lump sum fortune.
For instance, if the person owns around 50,000 shares of penny stocks where a single penny stock is valued at $1, then a rise of $1 in penny stock will provide $50,000 in a single day. This doesn’t happen in case of a large share as buying a more significant percentage of stock required investing substantial capital for buying a large volume of shares.
Disadvantages of Penny Stocks
- Penny stocks are prone to manipulation of price.
- Penny stocks can be delisted suddenly without any warning.
- There is regulatory scrutiny which surrounds penny stocks.
- Penny stocks are also vulnerable to scam because a stock exchange at national-level doesn’t regulate them.
- Sometimes it is also very hard to determine whether the penny stocks are manipulated or genuine.
These risks have made the stock exchanges all around the UK, and the world in a separate category altogether called trade-to-trade basket. With penny stock, you cannot even share the trade in one day.
Even if penny stock involves a lot of risks, they can still be traded.
Ways for trading Penny Stocks
Sell them quickly:
The most enticing part of penny stocks is that they can make you a profit of 20% to 30% in a few days. And if you land up making such type of return with a penny stock then sell it immediately. In most cases, traded get extremely greedy when they aim to get a 1,000% return, and this is where they make the wrong move. Just take the profits and move on
.Never Sell them Short:
Nevertheless, the short-term pumped up penny stocks might seem lucrative but never head into that direction. Penny stocks are incredibly volatile like cryptocurrency, and if you get in the wrong side of the trade, then there is a chance that you might lose 50% or more on than that in a flash.
Always focus on high volume penny stocks
Always stick to the penny stocks which is comprised of 100,000 shares in a single day. Trading penny stocks with low volume might get you into an awkward position.Even though penny stocks have earned a bad reputation, profits can still be made. Contact SIPP claims company if you need any help for mis sold sipps.