The following 17 investing advice are applicable to all stock market investments, but they were developed and discovered in the chaotic world of tiny shares, or penny stocks. There are lessons to be learnt from an investment of $20 or $2 that cannot be taught by purchasing stock in GM or IBM.

Being in the thick of things is essential if you want to excel as an investor. The extremely volatile, quickly changing world of the smallest of investments is the best location to refine your talents, learn quickly, and continually adjust.

No matter the type of business or share price you may be purchasing or selling, apply the wisdom of these 17 ideas to your own trading approach.

Key Takeaways

• While not all investors should participate in cheap stocks, everyone can benefit from the knowledge gained from penny stock trading.
• The following are some lessons to be learned: cut losses early, let wins run, don’t add more money to a stock that is declining, and add more money to a successful investment.
• Before you invest actual money in penny stocks, try paper trading, which involves keeping track of the stocks you would have purchased.
• Make sure you only invest in penny stocks with funds you can afford to lose if you decide to do so.

1. Cut Losses Early

Take the discomfort and peel it off like a Band-Aid when shares start to move the wrong way. Of course, the value of any investment will fluctuate a little bit, but if the stock drops below your set loss threshold, it might be time to accept the loss and move on.

Frequently, the stock will continue to decline, making the early exuberants look very wise. This creates the chance to reinvest at considerably cheaper prices in the near future.

2. Let Gains Run

Many equities begin to move in the right direction and then simply keep rising. The shares typically go well beyond what most investors may anticipate.

Even if their shares now trade for $10, $20, or even $50 per share, some of America’s finest corporations began as penny stocks. If the company keeps expanding, shrewd investors hang on for the ride. While the shapes aim for the heavens, many others sell way too early, bragging about their 100% gain, before sobbing.

Reevaluate the underlying company on a regular basis to prevent selling too quickly. If their market share, sales, and client base are increasing, you might want to consider a long-term investment.

3. Don’t Average Down

By investing more money in a declining stock, most investors attempt to make up for their errors. They purchase further shares of the company, for instance, if the value of the shares falls by 30%, 50%, or 88% after their initial purchase. Because of this, their average share price is lower.

The use of this strategy has drawbacks. First off, the investor was initially mistaken about the shares. Additionally, there is certainly a reason why the investment is declining, and most often, there is still a lot of downside left. Additionally, the investor just risked more of their (often tiny) portfolio on shares that are falling in price!

4. Average Up

Averaging up, as opposed to averaging down, is frequently a more successful tactic. An investor’s trade is validated if they make a buy and the stock price rises afterward. The shares are rising, and if the underlying business is functioning well, an uptrend will typically last. More money invested in a profitable venture frequently yields excellent returns.

5. Paper Trade

Many people desire to invest in penny stocks but are unsure of where to start. Additionally, they are wary of the dangers or lack basic knowledge of the purchasing and selling procedure.

The solution is paper trading. Simply keep track of the stocks you would have purchased with fictitious funds. Paper trading will significantly improve your trading performance and stock market knowledge. There is no danger and no cost!

6. The Single Biggest Investor Risk

Confirmation bias, which poses the single greatest risk to all investors, received a whole piece all to itself. Before you trade another share of stock, educate yourself about it.

7. Don’t Trust Free

Free stock picks are extremely risky, especially in the world of penny stocks. When these dishonest marketers attempt to deceive large numbers of people into purchasing shares of their most recent worthless firm, ulterior motives collide with greed.

Because of this, all of their communications—including the rumors they spread online, the unsolicited faxes they deliver, and the deceit they spread through unpaid internet newsletters—are always free.

8. Don’t Follow Advice from Friends . . . Unless They Are Doing Better Than You

Why would you believe a miserable life coach? Why take lessons from a Jiu-Jitsu coach who has been defeated in every match? Pay attention to those nearby who are successful investors and ignore everyone else.

9. Mandatory: Due Diligence

Don’t place a significant wager on a casino game you don’t fully grasp. Similar to this, it is crucial to know where your money is going if you buy in any shares, but especially if they are volatile, hazardous, little companies called penny stocks.

Any organization has many different aspects, so taking the time to learn about them will prevent any unpleasant surprises.

10. Buy What You Know

Too many people purchase stock in companies they have no idea whatsoever. Avoid the trendy “nano-surgery neuro-electrode company” and concentrate on stocks you are familiar with. You will have an edge over other investors if you understand how they generate their money, what they want to accomplish, and where the industry is headed.

11. Stick to the Good Markets

There are some fairly bad markets that are overrun with subpar businesses, particularly with penny stocks. You will be at a disadvantage if you purchase companies listed on the OTCQX or Pink Sheets as you will be surrounded by numerous unwise investing options. Any investor purchasing shares on these low-quality exchanges faces extremely stacked odds.

12. Keep Doing What Works, Stop Doing What Doesn’t

Whatever you are investing in and however you are doing it, you should increase your investment in the winning techniques while reducing your investment in the failing ones.

For example, if you consistently make money mining penny stocks but lose money on exchange traded funds (ETFs), it’s definitely time to shift your strategy to focus on your winners.

13. Be Wary of Media

Most of the time, the “news” does not inform you of what is happening or even what will happen. Reports in the media frequently discuss events that have already occurred.

They do a wonderful job of making the material seem current or important at the time, but by looking at things from a different perspective, you will start to notice which events are about to fade away, which can help you make better investing selections.

For instance, dotcom stocks received the most media attention right before the bubble burst. Prior to the industry’s collapse, marijuana penny stocks received the most media attention. In any case, the news reports on past noteworthy events rather than current ones.

14. Don’t Buy What Everyone Else Is Buying

The investment is overvalued if mob purchasing is taking place. You will never receive a fair price for anything, whether it be marijuana penny stocks, Bitcoin-related enterprises, dotcom corporations, or Dutch tulip bulbs.

Another bad aspect of this situation is that the stampede is set to finish just as the majority are learning about the most recent fad and joining it. Within weeks, if not just a few days, fortunes will be invested and lost.

15. Call the Company

The best way to conduct thorough due diligence and learn everything there is to know about an investment’s potential is to use this strategy. Every publicly traded stock on the market has a contact for investor relations who will be more than delighted to respond to all of your inquiries. It’s free, and it may very well assist you in determining whether or not your investment will be successful.

16. Be Honest With Yourself

Perhaps penny stocks and investing aren’t the correct choices for you. Spend your time and money on something else that you find more enjoyable instead. If you decide to invest, be sure you are truly employing risk capital so that you will still be able to cover your rent if the shares you purchased start to perform poorly.

17. There Is No Magic Investing Bullet

Investors jump from one idea to the next far too frequently, rarely profiting from any of them. The “robot that picks stocks (scam)” might switch to trading options if it didn’t work. Short selling might be their next move if it doesn’t succeed. When that doesn’t work, they attempt binary options, derivatives, foreign currency, commodities, and an endless list of other things.

Pay close attention to these 17 investing advice recommendations. They will quickly teach you how to trade stocks successfully.

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