Whichever name you like to employ, whether it be penny stocks or micro cap stocks, you almost certainly appreciate the massive promise there is. A colleague of mine understood his pal from high school sat at his mom's house all day and ate cake as he allegedly hit it big with a micro cap stock. Take that for what it's worth, but there are a lot of people out there who put money on on a stock and won big time.
Of course the flip side is that loads of individuals drop a ton of money by making a bet on cheap stocks. The equation of playing micro cap stocks amounts to putting the odds in your favor as much as you possibly can, and attempting to diminish your risk as best as you can.
Let's look at how to place the chances in your favor to capitalize on profit potential before you get a micro cap stock:
* Identify bullish technological analysis patterns that suggest a break to the upside
* Examine news stories and determine the hopefulness portrayed within the news
* Recognize past resistance levels and plan to exit or lessen your position accordingly
* Check the proportion of shorts in the share of stock you are interested in, the higher the better
* Investigate and recognize forthcoming newsworthy events that could negatively or positively move share valuations, for example quarterly earnings release dates or projected dates for announcements on FDA approval of new drugs that have the ability to bring huge profits to small pharma companies.
Now we can glance at how to curtail our danger when trading micro cap stocks, since unquestionably there will be a little losers:
* Use of stop loss orders, setting them just below previous support levels can save you an absolute huge amount of cash if the stock goes down fast
* Watch news develop with reference to earnings power for the company and sell if you find credible evidence that bearish sentiment will prevail by the time the next quarterly earnings release is out
* If your gut tells you to sell you with a minute or moderate loss, do it!
If all of this sounds like nonsense to you, I propose that you get a little more accustomed with micro caps and stocks in general. However don't think for a minute this stuff is over your head. If you have a burning yearning to make it big by playing the market, I think you stand an tremendous chance at achieving your dreams. Maybe you just need a little hand holding to get you on the right track.
If you would like to follow some of my micro-cap stock picks, you can sign up at my site free of charge. Some do extremely well for us, we like stocks with big potential in short periods of time. That way we can move on quickly if the pick doesn't move. It's an exciting thing to check your trading portfolio and see that your investment has gone up 100 percent or more in just a couple days, and that's what our end is with each pick.
Hopefully you have a small amount of time available each week to devote to start a part time endeavor into penny stock trading. It's really a great deal of fun, even though not all picks are winners.
So to finish the thoughts posed by the title of this article, I would say that playing these types of stocks is most definitely worth the risk if you play your trades right and know what to look for.