Finding good stocks to trade is arguably the most important part of trading online. With thousands of stocks on hundreds of stock exchanges, the world over you really is spoiled for choice. In fact, the biggest problem in choosing stocks is to sift through all the thousands of stocks and find the ones that can make you money.
Not all stocks are created equally and there are so many strategies for picking stocks that it can really be overwhelming if you are not very focused. One simple fact is that generally speaking, the more risk there is in any particular trade, the bigger the potential reward.
If you go and buy shares in Apple or Microsoft the risk is quite low. What are the chances of these two giant companies running away with your money?
The flip side is with high-risk stocks. The potential gains immense and returns of 1000% are very possible with start-up companies, but (and this is a big but) the risk is very high. With so-called penny stocks, it’s mostly start-up companies that are looking for venture capital to build their business.
When the company “makes it” and start expanding you can make a fortune. Unfortunately, many of them don’t and they can disappear overnight – leaving you with nothing.
When trading penny stocks you need to be very diligent with your research. There are most certainly a lot of opportunity trading these low-cap stocks but the high-risk factor keeps a lot of people at bay. More than anything, when you trade these low cap stocks you should never trade more than you can afford to lose. The risk is at least twice as much as with conventional stocks.
Don’t get swept away by promises of 2000% returns in a week or two. It rarely happens. Try and look for good companies and focus on potential value. Every big company started small. Keep that in mind and try and see what a company’s future potential might be. What kind of backing do they have? Is it a legit business? What does the press have to say about them? Do your research, proceed slowly and with caution and keep a very close eye on these stocks.
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